I was wondering how one could use a CES function in growth accounting exercise, does anyone have notes or resources that demonstrate this exercise? I've done growth accounting exercise using Cobb-D function, but never tried with CES.


First, remember that a Cobb-Douglas production function is a special case of a CES production function (see e.g. here).

Secondly, there are critical assumptions that have to be met when one tries to determine TFP (or the "Solow residual" as it is often called). The most important one is perfect competition.
Furthermore constant returns to scale. Without those the factor shares (capital, labor over total output) and output elasticities are not identical.
Thus the standard "growth account exercise" within the Solow-Swan framework is not possible with a general CES function.

  • $\begingroup$ Many thanks, but I've read a published paper where authors do a growth accounting exercise using a CES function of production. This puzzled me a bit and hence my question. Unfortunately, the authors do not provide what assumptions they made for this exercise. $\endgroup$ – london Dec 17 '15 at 14:17
  • $\begingroup$ How about the assumption of factor substitution elasticity? $\endgroup$ – london Feb 25 '16 at 13:48

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