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A GENERALIZED MODEL FOR THE CES‐VES FAMILY OF PRODUCTION FUNCTION *
Author(s) -
Tsang Herbert H.
Publication year - 1976
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1976.tb00553.x
Subject(s) - production (economics) , function (biology) , profit (economics) , economics , econometrics , productivity , production model , production function , mathematical economics , mathematics , microeconomics , macroeconomics , evolutionary biology , biology
A bstract Four types of relationships constituting an economic model of production are specified in order to deduce the mathematical form of the production function. A technical equation restricts the production function to be a member of the homogeneous class. A behavioral equation describes the profit‐maximizing character of the producer. An empirical equation attempts to explain the average productivity of labor. Finally a demand function reflects the structure of the output market. The derived production function is seen to fall into the widely discussed CES‐VES family. The economic model thus in a sense provides a theoretical basis for the CES‐VES production functions. The economic properties of the derived production function are also studied in detail and alternative estimation procedures are reviewed critically.