Publications   Empirical StudiesOldrich & Ludmila Kyn: Production Functions for Eastern Europe



Four questions were formulated at the end of the introduction to this paper. The analysis of the estimations of many variants of production functions for Czechoslovakia, Poland, East Germany, Hungary, Bulgaria and Romania suggests the following answers to those questions;

(1) The average rates of technical change in the postwar period when measured in terms of the official gross value of output were quite high, however, at least in four out of six countries, i.e. in Czechoslovakia, Poland, Germany and Bulgaria the rates of technical change were clearly declining, so that at the end of the sixties they were only moderate. When measured in terms of GNP the rates of technical change were smaller but still respectable. On the other hand GNP does not show such a deterioration of the economic performance as GVO does.

(2) No overwhelming evidence about any unusual values of capital and labor elasticities was found. Actually most of the estimates gave standard values of capital elasticity of output around .2-.3 and labor elasticity of output around .6-.8.

(3) Similarly no clear evidence of either economies or diseconomies of scale was found. The returns to scale parameter was sometimes above, sometimes below but very frequently quite close to 1.

(4) Finally the same conclusions can be made about the elasticity of substitution which was sometimes estimated larger than 1 sometimes smaller than 1.

The Cobb-Douglas production function with constant returns to scale is probably still the best description of the Soviet-type economies.



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