Page 95 - 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

L parameters were equal to 0,6397585 and 0,3602415 respectively. However our

results were 0,3217946 and 0,6782054 respectively.

Thus, based on results under the Weitzman model we can conclude that

during the period of 1990-2006 Azerbaijani economy experienced the excess of

labour force.

Considering that substitution elasticity for Azerbaijani economy under the

evaluation of CES production function is higher than 1 (=3), we can agree with

such conclusion. U.İsterli and S.Fisher came to conclusion that the low level of

substitution elasticity between labour and capital in USSR economy was the main

reason for stagnation. Thus in cases of low elasticity the excess of the capital is not

provide the same growth in production of goods. We also came to conclusion that

lack of capital provision for the existing labour force in 1990-1996 brought about

decrease in the production.

For the period of 1994-2000 the valuation of parameters of CES function for

Azerbaijan in Mathcard Application Package shown that the substitution elasticity

between labour and capital is close to one (=1,0003). Thus during this period the

balance between the labour force and provided capital was re-established. In other

words, during this period the qualification and education of the labour force was in

accordance with provided capital.

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