Page 79 - Azerbaijan State University of Economics

Yadulla H. Hasanli: The evaluation of mutual substitution elasticity of capital and labour
factors by application of CES function for economy of Azerbaijan

Keywords: Capital, Labour, Substitution elasticity, Production function, Markward

method.

JEL Classification Codes: C01, C02

Introduction

As you may know some production functions require the certain researches

during evaluation of their parameters. The one with the most common feature and

reflecting the neaclassic theory is the production function of Constant Elasticity of

Substitution (CES).

Here, Y-Gross domestic product, , K-Capital, L-labour force.

If we consider the effect of neutral technical progress according to Hicks the

CES production function will be written as following:

Here, is irrational and called figure of Eyler figure: , t is indicating

time.

The following parameters should be valued:

is scale ratio ( ) and its value depends on what is the unit of the

determinant. If determinant is homogenous or shown by percentage, them the ratio

shows the intensity of the production and equal to something around 1. -is

allocation ratio. is a degree of gomogenity. ( , is a level of technical

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