1. How Sound Are The Foundations Of The Aggregate Production Function?
... to the income identity, ab. If, however, we mistakenly statistically fit a Cobb-Douglas function to these data, we will find the best fit depicted by the dotted curved line, ef. The residuals will be autocorrelated. [Figure 1 about here] Of course, the empirical question arises as to how much variation in the data is required before the Cobb-Douglas ceases to give a plausible fit ... wages. These results occur even though it can be shown unequivocally that the "underlying technical relationships do not look anything like an aggregate Cobb-Douglas (or indeed any aggregate production func...
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- Grade Level: Undergraduate