EMPIRICAL ANALYSIS OF PRODUCTION FUNCTIONS AND TECHNOLOGICAL PROGRESS IN CROATIA 1960-1990

Different production functions were analysed and applied to the economy of Croatia from 1960-1990. This paper provides an attempt at an explanation of Croatia productivity (labour versus capital) along the lines proposed by the neo-classical growth theory. Production function estimates for social product are provided using Cobb-Douglas and the constant elasticity of substitution production function (CES). Econometric applications consist of the estimating four specifications of the C/D production function: (a) , (b) , (c) , (d) , and one specification of the CES production function: (e) . An econometric testing is employed to investigate the long-run property of the estimated equations. We will see how the elasticity of substitution is related to the substitution parameter r and indicate how Cobb-Douglas can be viewed as a special case of the CES production function., and also how is the Solow residual as a measure of total factor productivity distributed during the anticipated time.