On the Inapplicability of the Cobb-Douglas Production Function for Estimating the Benefit of Water Use and the Value of Water Resources

Shaofeng Jia, Qiubo Long, Raymond Yu Wang (), Jiabo Yan and Deyong Kang
Additional contact information
Shaofeng Jia: Chinese Academy of Sciences
Qiubo Long: Chinese Academy of Sciences
Raymond Yu Wang: The University of Hong Kong
Jiabo Yan: Chinese Academy of Sciences
Deyong Kang: Beijing Water Investment Center

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), 2016, vol. 30, issue 10, No 20, 3645-3650

Abstract: Abstract The Cobb-Douglas production function is often used to estimate the benefit of water use and the value of water; however, this is an incorrect application. A typical example of the inapplicability is that a negative output elasticity of water resources may be reached when empirical data is collected from the United States, Japan and the city of Beijing in China, where economic growth still increases when the quantity of water use decreases. It is counter-factual that the benefit of water use or the value of water resources are negatively associated with economic production as estimated by the Cobb-Douglas production function. In the case of a positive output elasticity of water resources, the Cobb-Douglas production function cannot be used either. The main reason is that the elasticity of water resources, as an input factor, reflects only part of its total contribution to economic output. In other words, the contribution of water resources to total economic growth, to a great extent, are embodied in total factor productivity, which refers to the portion of output that cannot be explained by the amount of water resources input in the Cobb-Douglas production function. For example, many technological and socio-economic inputs such as the investment on water saving technologies and the optimization of water use structure, surely embody the value of water and account for total economic output, yet these factors are not reflected by the economic output elasticity of water resources in the Cobb-Douglas production function.

Keywords: Cobb-Douglas production function; Benefit of water use; Value of water resource; Total factor productivity (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s11269-016-1349-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:waterr:v:30:y:2016:i:10:d:10.1007_s11269-016-1349-z

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11269

DOI: 10.1007/s11269-016-1349-z

Access Statistics for this article

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA) is currently edited by G. Tsakiris

More articles in Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA) from Springer, European Water Resources Association (EWRA)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().