<p>First, remember that a Cobb-Douglas production function is a special case of a CES production function (see e.g. <a href="https://en.wikipedia.org/wiki/Cobb%E2%80%93Douglas_production_function" rel="nofollow">here</a>).   </p>

<p>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.<br>
Furthermore <strong>constant returns to scale</strong>. Without those the factor shares (capital, labor over total output) and output elasticities are not identical.<br>
Thus the standard "growth account exercise" within the Solow-Swan framework is not possible with a general CES function.</p>

CC BY-SA 3.0
2015-12-17T14:17:47.443Z
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.
london
CC BY-SA 3.0
2016-02-25T13:48:04.347Z
How about the assumption of factor substitution elasticity?
london
CC BY-SA 3.0
2015-12-17T11:03:05.780Z
2015-12-17T11:03:05.780Z
Fitzroy Hogsflesh
<p>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. </p>

<macroeconomics><economic-growth>
Growth accounting using CES functions
london
# Growth accounting using CES functions

(Asked by: username_0 on 2015-12-01)

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.

**Tags:** macroeconomics, economic-growth


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## 1 answers

### Answer by username_1 on 2015-12-17. Score: 2 | Accepted answer

First, remember that a Cobb-Douglas production function is a special case of a CES production function (see e.g. [here](https://en.wikipedia.org/wiki/Cobb%E2%80%93Douglas_production_function)).

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.

> **Comments:**
> **username_0**: 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.  
> **username_0**: How about the assumption of factor substitution elasticity?  

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