CES production function

Proposed by the American economist Kenneth Arrow (1921- ), Hollis Chenery (1918- ), BAGICHA S. MINHAS, and Robert Solow (1924- ), CES production function is also known as the constant elasticity of substitution function.

This is a linearly homogenous production function with a constant elasticity of input substitution, which takes on forms other than unity.

It replaced the Cobb-Douglas Production Function model which looked at physical output as a product of labor and capital inputs.

The equation for the CES production function model is:

Q = A(ak – b-b + (1 – c)L – b-b) – 1/b

where Q is output, K capital and L labor and a, b, c are constants.

K Arrow, H Chenery, B Minhas and R Solow, ‘Capital-Labor Substitution and Economic Efficiency’, Review of Economics and Statistics, 43, 3 (August, 1961), 225-50

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