Page 92 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.70, # 1, 2013, pp. 77-96

A.Granberg performed the following valuation of CES function for the period

1960-1985.

1

Y  , 0 966 , 0 ( 4074 K  , 3 03  , 0 5926 L  , 3 03 ) , 3 03 e 0 , 0252 t

R2 = 0,9982; DW = 1,76

R2 – is determination ratio and DW is dependent identified by the statistical

method.

The substitution elasticity is equal to  = 1 =0,25. The value to the
1  

substitution elasticity obtained by the other scientists during the various periods

were below one: 0,4 (M.Weitzman), 0,37-0,43 for various data row (U.Easterly və

S.Fisher). In general, for USSR economy the substitution elasticity is equal to 0,4.

This means that the substitution level between the factors is lower than that

obtained under the Cobb-Douglass method (in Cobb-Douglass function the

substitution elasticity in the production function is equal to one). Thus application

of Cobb-Douglass production function for this function is not able to reflect the

true picture.

4. Realization of the model and analysis of results

In order to evaluate the parameter of CES function following

program was prepared:.

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