CD production function under constant returns to scale

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agy038
Posts: 5
Joined: Wed Aug 27, 2014 12:56 am

CD production function under constant returns to scale

Postby agy038 » Thu Dec 25, 2014 8:03 am

Dear all,
How do I estimate a Cobb-Douglas production function under the assumption of constant returns to scale?

So the production function must be Y=(K^alpha)*L^(1-beta) such that alpha+beta=0 . In other words, instead of taking the logs and estimating the function and deciding if there is a constant, increasing or decreasing returns, I want to restrict the function such that there is constant returns. Is there an estimation called "resticted estimation" or something like that?

Thank you all.

startz
Non-normality and collinearity are NOT problems!
Posts: 3796
Joined: Wed Sep 17, 2008 2:25 pm

Re: CD production function under constant returns to scale

Postby startz » Thu Dec 25, 2014 8:56 am

Dear all,
How do I estimate a Cobb-Douglas production function under the assumption of constant returns to scale?

So the production function must be Y=(K^alpha)*L^(1-beta) such that alpha+beta=0 . In other words, instead of taking the logs and estimating the function and deciding if there is a constant, increasing or decreasing returns, I want to restrict the function such that there is constant returns. Is there an estimation called "resticted estimation" or something like that?

Thank you all.
Where you have beta in the estimation command, substitute in (-alpha).


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