T. Some Remarks on Growth Analysis on the Basis of CES

Abstract

The CES function is a production function which is more general than the Cobb–Douglas function; one advantage of the CES function is that the income shares of input factors, say labor and capital, are not fixed but depend on the respective factor productivity and the parameter ρ which in principle can be negative or positive and indirectly indicates the elasticity of substitution between the two (or n) production factors considered. A disadvantage of the CES function is that is more complex to handle mathematically. One interesting question is to explicitly consider a CES function in the context of a neoclassical growth model—be it a one-country model or a two-country model.