In: Economics
What are the special properties of the Cobb-Douglass production function, and how might the function be used to calculate the sources of growth?
Cobb-Douglas function is given by:
Y =A(L^α)(K^β)
Some of the special properties of the Cobb-Douglas functions are:
On analysis of the Cobb-Douglas function, we could relate with the contribution of labor production and the amount of physical capital formed, and how these two factors contribute to output growth in the long run. The total factor productivity in the cobb douglas function accounts for the economic efficiency in the economy being considered. The coefficients α and β give the respective weightage of labor and capital in the output generated.
Hope this helps. Cheers!