A STUDY ON ESTIMATION OF COBB – DOUGLAS PRODUCTION FUNCTION FOR DEVELOPING COUNTRIES

Abstract

Discussions on the production function have always taken care of the attention of economists. The production function is a mathematical expression that shows the relationship between inputs and outputs. The characteristics of this relationship can be expressed in three different concepts, scale flexibility, output flexibility and substitution flexibility, respectively. Gross Domestic Product (GDP) is an indicator of economic growth. This study aims to estimate the Cobb - Douglas production function in developing countries by using capital, labor and energy consumption input factors and investigate the effect of economic input factors on economic growth. For this purpose, the Cobb - Douglas production model was created using capital, labor and energy consumption inputs. In this study, linear panel data analysis techniques were used for 22 developing countries with the data of the 1980-2016 period. Substitution elasticity of capital, labor and energy consumption inputs in Cobb - Douglas production function is 0.602, 0.455, 0.147, respectively, which means that the economies of developing countries are capital intensive. The total share of all production factors is 1.203 and there is an increasing return to scale. Capital, labor and energy consumption inputs of these economies have a positive impact on GDP. In addition, insufficient capital in these countries can be compensated by labor and/or energy.