The Cobb-Douglas function as a flexible function. Analysing the substitution between capital, labor and energy

No 2017-12, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: By defining the Variable Output Elasticities Cobb-Douglas function, this article shows that a large class of production functions can be written as Cobb-Douglas function with non-constant output elasticity. Compared to standard flexiblefunctions such as the Translog function, this framework has several advantages. [1] It does not requires the use of a second order approximation. [2] This greatly facilitates the deduction of linear input demands function without the need of involving the duality theorem. [3] It allows for a generalization of the CES function to the case where the elasticity of substitution between each pair of inputs is not necessarily the same. [4] This provides a more general and more flexible framework compared to the traditional nested CES approach while facilitating the analyze of the substitution properties of nested CES functions. The case of substitutions between energy, capital and labor is provided.

Keywords: flexible production functions; Cobb-Douglas function; substitution capital-labor-energy (search for similar items in EconPapers)
JEL-codes: D24 E23 (search for similar items in EconPapers)
Date: 2017-04-20
New Economics Papers: this item is included in nep-eff, nep-ene and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1712

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