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14. Dez 2012

DIW Applied Micro Seminar Forget Cobb-Douglas Production Function: Not just yet

[World] Cobb-Douglas (CD thereafter) aggregate production function is deemed too restrictive. Estimation of the CD technology with constant coefficients indeed provided very little flexibility in explaining the production process across the countries. Even if the parameters of the CD production function are allowed to vary across predefined regions (parts of the world), they are ad hoc restricted the be the same within these regions. We allow the parameters of the CD production technology themselves be the function of other macroeconomic variable(s). Further, instead of estimating the regression in logarithmic form, which is habitually done in the literature, we do the estimation in levels. We employ Poisson pseudo maximum likelihood (PPML) since the convergence of the nonlinear least squared proves hard to achieve. This leads to the PPML model with varying coefficients, which offers flexibility in interpretation of the production process.

  • Oleg Badunenko, Universität zu Köln
  • Zeit
    Eleanor-Dulles-Raum DIW Berlin im Quartier 110 Raum 5.2.010 Mohrenstraße 58 10117 Berlin
    im DIW Berlin
    Tel.: +49 30 89789 679