Page 94 - Azerbaijan State University of Economics

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

Based in data for the period 1990-1996 the CES function for Azerbaijan

economy was evaluated based on Marward method and Kmeta approximation (11).

Obtained results were approximately the same:

Y  1,05733e  0,1919t (0,3217946 K 0,666  0,6782054 L 0,666 ) 1,4999

R2 = 0,87346; DW = 2,394745

Substitution elasticity  = 3.

Statistical characteristics show that model is adequate.

We also obtained the substitution elasticity for Azerbaijan much higher than

one. As a result evaluation of economy of Azerbaijan is not complete if the Cobb-

Douglass function is applied. In reality, during the evaluation Azerbaijani economy

using the Cobb-Douglas production models the obtained results do not provide

adequate results as in CES function. In other words, making in advance the

substitution elasticity equal to one and implementation of valuation of the

parameters will not provide the correct results. However obtained a- constant  -

the growth rate of technical progress in CES function were approximately the same

as in Cobb-Douglass function. It indicates that the efficiency of the economy and

effect of technical progress in the country estimated in Cobb-Douglass were once

more verified in CES production function.

The value of allocation parameters of capital and labour force obtained in

M.Weitzman model were contradicting. Under the Weitzman approach the K and

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