Differences and Connections Between Individual (Leontief Type) Activities and Aggregate (Cobb-Douglas Type) Results
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arXiv
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| Format: | Preprint |
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2025
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| _version_ | 1866909967634661376 |
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| author | Posada, Carlos Esteban Posada |
| author_facet | Posada, Carlos Esteban Posada |
| contents | Each production establishment is assumed to have, at any given time, a unique combination of capital and labor (a Leontief function), but the aggregate output at that same time must still be modeled with a Cobb-Douglas function (or a CES, although the latter yields less efficiency). This has two implications: 1) the total factor productivity variable of the macroeconomic function is endogenous: It depends primarily on the technical factors of the individual establishments and, secondarily, on their levels of capital and labor.; 2) the optimization processes of any establishment cannot be instantaneous, even in the absence of (monetary) adjustment costs; they are processes occurring over several time stages and depending on expectations. However, these implications do not substantially contradict what would correspond to the optimization of a hypothetical firm described by a Cobb-Douglas (or CES) function. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2512_15520 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Differences and Connections Between Individual (Leontief Type) Activities and Aggregate (Cobb-Douglas Type) Results Posada, Carlos Esteban Posada Theoretical Economics Each production establishment is assumed to have, at any given time, a unique combination of capital and labor (a Leontief function), but the aggregate output at that same time must still be modeled with a Cobb-Douglas function (or a CES, although the latter yields less efficiency). This has two implications: 1) the total factor productivity variable of the macroeconomic function is endogenous: It depends primarily on the technical factors of the individual establishments and, secondarily, on their levels of capital and labor.; 2) the optimization processes of any establishment cannot be instantaneous, even in the absence of (monetary) adjustment costs; they are processes occurring over several time stages and depending on expectations. However, these implications do not substantially contradict what would correspond to the optimization of a hypothetical firm described by a Cobb-Douglas (or CES) function. |
| title | Differences and Connections Between Individual (Leontief Type) Activities and Aggregate (Cobb-Douglas Type) Results |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2512.15520 |