Josheski, Dushko and Lazarov, Darko and Koteski, Cane (2011): CobbDouglas production function revisited, VAR and VECM analysis and a note on Fischer/CobbDouglass paradox.

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Abstract
CobbDouglas production function is a basic function in growth models. The modeling in this paper showed that VAR is stable; KPSS test showed that output, capital and labor are not trend stationary. Johansen’s cointegration test showed that a requirement for Fischer/CobbDouglass paradox to work is met at 3 lags, there factor shares are I(0). The Fisher/CobbDouglas Paradox is based on constant factor shares. (In terms of timeseries analysis, such constancy is equivalent to factor shares being I(0). The Fisher/CobbDouglas Paradox is thus why the estimated σ equals unity independent of the underlying production technologies generating the simulated data.At 4 lags however these variables are I(1) variables i.e. CobbDouglass is not CES function anymore. ADF test for factors of production showed that natural logarithm of capital is stationary variable, while log of labor is notstationary except at 10% level of significance. Adjustment parameters showed that labour responds more / faster than loutput (log of GDP) and lcapital on if there is change / shock in the system.VECM model failed the stability eingevalues test.
Item Type:  MPRA Paper 

Original Title:  CobbDouglas production function revisited, VAR and VECM analysis and a note on Fischer/CobbDouglass paradox 
Language:  English 
Keywords:  Fisher/CobbDouglas Paradox,cointegration, VAR,VECM,ADF test , unit root, 
Subjects:  B  History of Economic Thought, Methodology, and Heterodox Approaches > B2  History of Economic Thought since 1925 > B22  Macroeconomics O  Economic Development, Innovation, Technological Change, and Growth > O4  Economic Growth and Aggregate Productivity > O40  General 
Item ID:  33576 
Depositing User:  DJ Josheski 
Date Deposited:  20. Sep 2011 19:37 
Last Modified:  30. Dec 2015 10:57 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/33576 