Estimation of Substitution Parameter in Indian Industries: A disaggregated approach

Rajesh Chadha (), Sanjib Pohit (), P.L. Bina and N. Sangeeta
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N. Sangeeta: National Council of Applied Economic Research

No 62, NCAER Working Papers from National Council of Applied Economic Research

Abstract: In the past, growth models have been constructed and analyzed with the help of a production function subject to certain restrictive features. For quite some time, the Cobb-Douglas production function (CD) with its input exponents adding upto unity and a unitary elasticity of substitution were mostly used by the economists for analysis. In recent times, the constant elasticity of substitution production function (CES) which includes CD, as well as Leontif production function as its special case has been widely used in various studies. One major limitation of this production function is that the elasticity of substitution parameter is not variable along an isoquant, though it can take different values for different values for different industries. We have made an attempt to test whether the estimated values of elasticity of substitution between labour and capital for a sector tend to change from one year to another and also whether it is CD or CES production function that characterizes a particular sector.

Keywords: Industry (search for similar items in EconPapers)
Pages: 29 pages
Date: 1996
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Working Paper: ESTIMATION OF SUBSTITUTION PARAMETER IN INDIAN INDUSTRIES: A DISAGGREGATED APPROACH (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:nca:ncaerw:62

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