Traditional Production Function Research Articles

FOREIGN DIRECT INVESTMENTS IN THE ECONOMIC GROWTH OF THE OPEN ECONOMY OF UKRAINE

Abstract. In terms of globalization of the world economy, the open economy of a country participating in the globalization process becomes an organic element of the world economy and thus receives additional incentives for development. International flows of goods and capital allow countries to get new sources for economic growth. Economic growth is now not only a function of internal but also of external factors. It is they who now determine the modernization tendencies of national economic policies, forcing them to move in accordance with world trends. The purpose of the research is to assess the relationship between economic growth of the country and external factors of its economic development, as well as to identify the dependency between external factors in order to clarify their role in the modernization of national economy. With this aim, the analysis of the main parameters of openness of Ukraine’s economy is carried out, as of external factors that influence on the national economic development, changes in the traditional production function under the influence of introduction in it of external factors of development, the estimated indicators of the named influences are modeled. The novelty of the research is the identification of dependency between the forms of openness of the economy and economic growth, the development of a model of relationship between the forms of openness of the economy. Research method. The study is based on a set of economic and economic-mathematical methods that are needed to identify the influence of external factors on the national economy, especially methods of abstraction, systematic and structural-comparative analysis, synthesis and modeling of economic processes. Among the models used in the research is a multifactor regression model. The empirical basis was the materials of official statistics of Ukraine for 1999—2019. The results of research showed: the role of globalization of Ukraine’s economy in its economic development, the importance of FDI as an external factor of economic development, the strong link between international capital flows and international flows of goods into the Ukrainian economy, the positive impact of the latter on the former. Keywords: economic growth, globalization, external factors of economic growth, production function, open economy, FDI, foreign trade, government investment policy. JEL Classification F21, F43, F47, F62 Formulas: 7; fig.: 1; tabl.: 8; bibl.: 24.

A Multivariate Unobserved Components Model to Estimate Potential Output in the Euro Area: A Production Function Based Approach

This paper builds an unobserved components model that combines a multivariate filter approach with a Cobb-Douglas production function. This combination allows potential output estimates to incorporate more economic structure than the traditional production function approach, while retaining the ability to conduct growth accounting exercises. The model is a backward-looking state space model estimated with Bayesian methods employing the Kalman filter to jointly decompose six key observable variables (real GDP, unemployment rate, labour force participation rate, hours worked per person, a measure of core inflation and wage inflation) into trend and cyclical components. To do so, it relies on several reduced form relationships across the cyclical components, such as a wage and a price Phillips curve and an Okun's law type relationship, while it also assumes common trends for a few variables and allows for hysteresis effects. The model is estimated on aggregate euro area data with Bayesian methods. The paper finds that the resulting output gap estimates have good revision properties and reasonable forecasting performance in particular in terms of GDP and core inflation vis-a-vis a set of benchmarks.

The renewable energy and economic growth nexus in European countries

AbstractThe study examines the long‐run relationship between renewable energy consumption and economic growth within the framework of the traditional production function in 29 European countries from 1995 to 2016. The study was based on the panel unit root tests, panel cointegration test—the Kao (1999), Pedroni (1999, 2004), Westerlund (2005) and fully modified ordinary least squares estimator and dynamic ordinary least squares estimator. The study found that there is a long‐term equilibrium relationship between economic growth and renewable energy consumption and that renewable energy consumption has a positive impact on economic growth. The results suggest that the use of renewable energy as a global commodity in the process of economic growth is highly significant. Therefore, policies to promote renewables can provide for economic growth, an increase in renewables and the reduction of greenhouse gas (GHG) emissions, and ensure important sustainable development goals.

Influence of tax burden on economic development of agricultural enterprises in Ukraine

The condition of the effective development of agricultural enterprises in Ukraine is to increase the efficiency of using resource potential. At the same time, it is necessary to take into account the main factors of the development, including the tax burden on the industry. Therefore, it is important to study the impact of the tax burden on the economic performance of the agricultural enterprises. The article deals with the improvement of the traditional two-factor production function of the Cobb-Douglas through the inclusion of the additional factors. The four-factorial production-institutional function of agricultural enterprises in Ukraine has been constructed allowing to calculate econometric parameters and to evaluate the functioning of the industry. The patterns of the interaction of tax burden and economic growth agricultural enterprises in Ukraine are revealed. The calculated econometric parameters of the functioning of agricultural enterprises in Ukraine made it possible to determine the tax loadings points Laffer's of the first and second orders, the productivity of each factor, and the phased replacement of one factor to another. It has been proved that optimizing the tax burden on agricultural enterprises makes it possible to direct the resource potential to increase the agricultural volumes production and increase tax revenues from the industry.

Application of a modified CES production function model based on improved PSO algorithm

In the analysis of the economic growth factors, people often use the CES (constant elasticity of substitution) production function model to calculate the contribution rate of influencing factors to economic growth. However, the traditional CES production function model does not consider the period characteristic of technological progress on economic growth, so this paper puts forward a modified CES production function model. On the parameter estimation of the model, this paper presents an improved PSO (particle swarm optimization) algorithm with high precision and fast convergence. Using the modified CES production function model, this paper provides a scientific method to calculate the contribution rates of all factors influencing the economic growth. Finally, this paper performs the empirical analysis of the contribution rates of all factors influencing China’s economic growth.

Measuring Organisation Capital at the Firm Level: A Production Function Approach

Organisation capital is one of the key intangible assets of firms, driving innovation and firm performance. Measuring this asset has been notoriously difficult, however. Differently to other intangible assets, firms do not build up organisation capital primarily by monetary investment but rather through establishing new organisational routines and building up trust, which often do not coincide with any financial expenditure. Quantifying such efforts at the firm level has largely failed so far. This paper takes up a traditional production function approach which includes, in addition to labour and tangible assets, investment in all measurable intangible assets (technological and non-technological knowledge, software and databases, firm-specific human capital, brand equity), but excluding organisation capital. The residuum of the estimation is considered as a measure of a firm' organisation capital. Using panel data from the German innovation survey, we find higher organisation capital in young and small firms. Our measure tends to show a u-shaped link to qualitative indicators such as organisational innovation.

Internet use and labor productivity growth: recent evidence from the U.S. and other OECD countries

This study provides evidence on the nature and extent of the effect of Internet usage or penetration on labor productivity growth, while focusing on the recent experience in OECD countries. The basic model modifies the traditional labor-augmented production function approach by integrating Internet usage as a factor that improves labor quality. Variables on output, capital, and labor are extracted from official OECD publications, and data on the penetration ratio, a proxy for Internet usage, is obtained from an online source. The result is a panel that covers 28 OECD countries, including the U.S., over the time period from 2001 through 2016. Parameter estimates for Internet usage across the models are found to be positive, albeit with low statistical support. Based on a unique historical survey data set for the U.S. that separates Internet use at home from the use at work, a descriptive analysis for the U.S. suggests that growth of Internet use at work lowers productivity growth.

Estimation of technical change and TFP growth based on observable technology shifters

This paper models and estimates total factor productivity (TFP) growth parametrically. The model is a generalization of the traditional production function model where technology is represented by a time trend. It decomposes TFP growth into an unobservable time trend induced technical change, scale economies and an observable technology shifter index’s components. The empirical results are based on unbalanced panel data at the global level for 190 countries observed over the period 1996–2013. It uses a number of exogenous growth factors in modeling four technology shifter indices to explore development infrastructure, finance, technology and human development determinants of TFP growth. Our results show that unobservable technical change remains the most important component of TFP growth. Our findings also show that technical changes and TFP growth are unexpectedly negative across all country income groups and years.

Pesticide use, production risk and shocks. The case of rice producers in Vietnam

In this paper, we try to understand pesticide input decisions among Vietnamese rice producers by examining the production risk effects of pesticide use, applying both a lottery game and a more traditional production function approach. Production function estimates show that excessive pesticide use makes production riskier. This result is supported by the lottery approach, which signals that more risk averse farmers use less pesticide, implying that pesticide is a risk-increasing input. We also show, that higher uncertainty regarding drought relative to pest is likely driving the increasing risk effect of pesticides. Therefore, we claim that the relative importance of multiple uncertainties on pest and water is relevant to determine the risk property of pesticide.

Solving the Time-Varying Cobb-Douglas Production Function Using a Varying-Coefficient Quantile Regression Model

The output elasticity estimated by the traditional Cobb-Douglas production function is a fixed constant that describes developed countries with relative stable factor shares well. While the fixed constant fails to describe developing countries with changing factor shares during economic transitional periods, such as China. In this paper, we construct a time-varying elasticity production function model and extend the Cobb-Douglas production function to a time-varying elasticity Cobb-Douglas production function. The semi-parametric varying-coefficient quantile model, together with the local polynomial and the two-phase methods, is used for the estimation of the time-varying elasticity of the capital coefficient and the labor force. Empirical research on Chinese economic growth shows that the time-varying elasticity of capital is declining and the time-varying elasticity of the labor force is increasing gradually.

Research on energy directed technical change in China's industry and its optimization of energy consumption pattern

Crucial to the green and sustainable development of China's industry are both choosing an appropriate path of directed technical change and optimizing and improving energy consumption pattern. In this paper we incorporate fossil energy, non-fossil energy and environmental factors into the traditional production function and calculate the factor output elasticity, the growth rate of environmental total factor productivity, the factor-biased degree of directed technical change and factor substitution elasticity in China's industrial sector based on stochastic frontier analysis of the transcendental logarithmic production function. The results show that the high output elasticity of capital leads to the highest factor-biased degree of directed technical change of capital although it is accompanied by an increase in energy consumption and environmental degradation. At present, the factor-biased degrees of directed technical change in China's industry, from high to low, are capital, the environment, fossil energy, labor and non-fossil energy; these can be seen as the root cause of, among other things, overcapacity, energy shortages and environmental pollution. Optimizing the path of directed technical change of labor, capital and non-fossil energy is an advisable way to solve the above problems. The patterns of energy consumption in industrial production in most provinces are unsustainable and each province should optimize its local energy consumption pattern according to those technical changes biased towards non-fossil energy and the positive factor substitution relationship between two kinds of energy.

A Modified CES Production Function Model and Its Application in Calculating the Contribution Rate of Energy and Other Influencing Factors to Economic Growth

Abstract In the analysis of economic growth factors, the constant elasticity of substitution (CES) production function model is used to calculate the contribution rates of influencing factors to economic growth. However, the traditional CES production function model fails to consider the staged characteristics of economic growth. Therefore, this study provides a modified model of the CES production function. With regard to its application, a new method for calculating the contribution rates of energy and other influencing factors to economic growth is proposed using a modified CES production function model. This work concludes by calculating the contribution rates of Chinese energy and other influencing factors to economic growth.

Export and gender difference in production contribution: A joint and non-linear analysis using panel and firm-level data

Trade liberalization has been widely recognized to have a profound influence on the labor market, especially in developing countries. Amid the transformation of gender roles, the improvement of female workers’ welfare has received increasing attention. In such studies, the gender wage gap generally is the focus, and the residual wage gap is commonly used to measure discrimination. However, this paper empirically examines gender differences in workers’ contributions to production through labor efficiency and productivity, which are defined separately. We use panel data on Chilean manufacturing firms from 2001 to 2007. Non-linear estimations are conducted to determine the gender differences in these firms. We first decompose male and female labor efficiency based on a traditional Cobb-Douglas production function. Next, we extend the Cobb-Douglas function and use a semi-parametric method to remove endogeneity and reduce bias estimation. We then also decompose female and male workers’ contributions to productivity. The results show that, among domestic firms which do not export, female workers contribute significantly lower efficiency and productivity than male workers. Among firms which participate in the exporting market, the differences in the efficiency and productivity of female and male workers are insignificant. Therefore, gender production differences are found to be significant in domestic but not exporting firms. Besides the firms’ exporting status, we also estimate the impact of capital ownership and exporting revenue on gender as alternative robustness tests. The findings remain consistent. Firms which do not adopt foreign capital, or operating exclusively in the domestic market, have significant, unequal distributions of labor efficiency and productivity between female and male workers. Firms which are actively involved in foreign markets have insignificantly gender differences. Therefore, export-market participation indeed reduces gender differences and guarantees similar contributions by female and male employees. High productivity, advanced managerial philosophy, and capability to compete globally all encourage a firm to export, and to equalize the treatment and contribution of male and female employees as well.

The renewable energy and economic growth nexus in Black Sea and Balkan countries

The aim of this study is to explore the relationship between renewable energy consumption and economic growth within the framework of traditional production function for the period of 1990–2012 in 9 Black Sea and Balkan countries. For this purpose, we use Pedroni (1999, 2004) panel cointegration, Pedroni (2000, 2001) co-integration estimate methods and Dumitrescu and Hurlin (2012) heterogeneous panel causality estimation techniques. The study has concluded that there is a long term balance relationship between renewable energy consumption and economic growth and renewable energy consumption has a positive impact on economic growth. Heterogeneous panel causality analysis results support growth hypothesis in Bulgaria, Greece, Macedonia, Russia and Ukraine; feedback hypothesis in Albania, Georgia and Romania; neutrality hypothesis in Turkey and according to the panel data set including all nine countries the results support feedback hypothesis. With the findings, it was concluded that there is a significant impact of renewable energy consumption on economic growth in Balkan and Black Sea Countries.

Public expenditures and the production of education

The relationship between public education expenditures and student outcomes remains an important concern for policy analysts, educational administrators, and the public at large. While previous studies have failed to identify a consistent relationship between public investments in education and positive student outcomes, most analyses have not accounted for the different educational goals associated with various instructional expenditure categories. This study builds on prior research by using Pennsylvania’s public school districts to test proposed improvements in model specification for the traditional education production function. Using longitudinal, fixed-effects models, a detailed disaggregation of instructional expenditures is undertaken in order to account for the likelihood that different instructional subcategories (i.e. regular programming, special education, and vocational instruction) influence student outcomes in varying ways. The results suggest that the impact of expenditures may be understated in previous studies based on a failure to account for these distinctions, particularly in the case of Mathematics education.

Electricity Consumption and Economic Growth in Jordan: A Multivariate Approach

This paper aims to examine the impact of electricity consumptionon economic growth in Jordan using annual data over the period 1985-2013.To achieve the goal, an Autoregressive Distributed Lag (ARDL) approach isimplemented to estimate a logarithmic form of the traditional production function(Cobb-Douglas), where output is a function of electricity, capital and labour.According to the results of the estimation,the estimated long-run elasticitiesof output with respect to electrical energy, capital and labor are 0.742, 0.194and 0.422, respectively; while the short-run estimates are 0.330, 0.086, and0.343, respectively. Granger-Causality test has shown a positive unidirectionalrelationship directed from electrical energy consumption towards economicgrowth supporting the hypothesis.

Aggregate Production Function, Its Determinants and Their Impacts on Aggregate Output: Case of Bahrain

Aggregate Production Function, Its Determinants and Their Impacts on Aggregate Output: Case of Bahrain Ibrahem H. Alezzee Abstract In this paper an attempt is made to examine and analyse the influence of a few determinants of the level of real output (RGDP) of Kingdom of Bahrain, using Aggregate Cobb-Douglas Production Function (APF). Besides the inputs of labor (LF) and capital accumulation (GCF), two other factors believed to have essential impacts on the level of aggregate output, namely expenditure on educating (EDUR) and life expectancy (LIFEXP) are added to the traditional Cobb-Douglas production function as determinants of real output. Time series data on all the relevant variables have been used and tested for stationarity and association among them, using Augmented Dickey-Fuller test of unit root and Co-integration test. The null hypothesis of unit root in Augmented Dickey-Fuller test is rejected and we conclude that the data are stationary at first difference. Co-integration test indicates only long-run associations amongst the variables in the analysis. VAR technique is used to examine the variability of the RGDP of Bahrain. Important finding of this analysis is that all inputs – capital accumulation (GCF), labor force LF), expenditures on education (EDUR) and life expectancy - have significant impact on the level of GDP, but in varying degrees. LF has the most powerful influence while GCF has the least as suggested by the elasticity of output with respect to labor force and capital formation. Moreover, increasing return to scale is indicated. Full Text: PDF DOI: 10.15640/jibe.v2n3a6

CELSE2010 Abstracts

In this paper, we focus on the evolution of both cognitive and non‐cognitive skills during adolescence. We use the framework developed by James Heckman and others who characterize the process of skill formation as a dynamic process in which skill begets skill. We first discuss the formalization of these dynamics by self‐productivities, cross‐productivities and complementarities. Next, we estimate dynamic models of skill formation during adolescence and provide empirical evidence for these dynamics for a cohort of students in Flanders. As the focus lies on the development of skills during adolescence, we supplement the out‐of‐school, family based drivers of skill differences by a vector of school investments. Next to a more complete modelling of input differences, this allows to focus on the impact of differential treatment within the educational system on generating skills differences. More specifically, we examine the role of tracking in the skill formation process and discuss its implications with respect to efficiency and equity. From a methodological perspective, we supplement the traditional production function approach by adressing the problems of endogeneity of inputs.

Forest management in Israel—The ecological alternative

Forest management (silviculture) is a long-established applied science, but also a field whose sustainability and ecological implications have been questioned. In this paper, we present the basic features of commercial together with a review of novel approaches for ecologically oriented forestry. The forestry advocates for multiple-species and structurally complex forests, and is directed toward a diverse array of objectives (ecosystem function, biodiversity conservation, wildlife habitats, visual quality, nutrient recycling, water retention, soil productivity, carbon sequestration, and amenity values), in addition to the provision of classic economic commodities.In temperate forests, economic goals have not been abandoned. The challenge in these systems is to develop a new silvicultural approach that will keep forests sustainable and also fulfill their traditional timber production function. In Israel, the majority of forests are not economic in the traditional sense; therefore, t...

Payments for forest environmental services: organisational models and related experiences in Italy

In the last decades, with the rapid structural changes in society and in consumers’ attitudes at both global and local scale, forest landowners and managers are facing a complex and multi-faceted demand, in which the role of forest services - recreation, landscape, biodiversity, C-sequestration amongst others - has become increasingly important. New forest policy tools are therefore required to create or consolidate the shift in forest management from the traditional production function towards more multi-stakeholders and multi-functional goals. On the basis of the existing theoretical background and by means of three explanatory-exploratory case-studies chosen amongst the few experiences present in Italy, the paper seeks to analyse the potentials and challenges in different organisational PES models applied to the provision of forest services in the country, with a special focus on tourism-related environmental services. The analysis shows that the markets for the various forest services have different drivers, sizes and levels of maturity. Performances in effectiveness, efficiency and equity are also highly variable. Strengths, weaknesses, opportunities and threats for new private and mixed private-public initiatives need therefore to be further explored before assessing the true potential for implementing PES in Italy.