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CES Production Function - A Review of Recent Literature


     

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In economic theory measuring the elasticity of substitution, i.e., to what extent the various factors of production can be substituted for each other in the productive process has been a very important issue. Prior to 1961 applied production function studies dealt almost exclusively with functional forms which assumed specific numerical values for the elasticity of substitution parameter, (σ). The Cobb-Douglas function implies unitary elasticity, while the Leontief fixed coefficient model and "the straight line isoquant" production function indicate the values of σ zero and infinite respectively. Since the publication of the famous 1961 ACMS paper research in the field of C.E.S. production function - both of theoretical and empirical nature - is being continued.
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  • CES Production Function - A Review of Recent Literature

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Abstract


In economic theory measuring the elasticity of substitution, i.e., to what extent the various factors of production can be substituted for each other in the productive process has been a very important issue. Prior to 1961 applied production function studies dealt almost exclusively with functional forms which assumed specific numerical values for the elasticity of substitution parameter, (σ). The Cobb-Douglas function implies unitary elasticity, while the Leontief fixed coefficient model and "the straight line isoquant" production function indicate the values of σ zero and infinite respectively. Since the publication of the famous 1961 ACMS paper research in the field of C.E.S. production function - both of theoretical and empirical nature - is being continued.


DOI: https://doi.org/10.21648/arthavij%2F1982%2Fv24%2Fi3%2F116530