For every firm to produce goods it needs inputs such as capital and labour. Mankiw (2005) refers to capital set of tools that workers use in the process of production e.g. Machineries such as computers whereas labour refers to the hours that employee invest working. Production function refers to the output of a firm, an industry or an entire economy for all combination of inputs (Banaeian and Zangeneh, 2001).Economists use production function to precise the relationship between labour and capital and according to Mankiw (2005). Production functions reveal the available technology for transforming labour and capital into output.
Tang (2008) highlighted the fact that theory of productivity was proposed by Knut Wicksell in 1851 which contributed a lot towards the works of Charles Cobb and Paul Douglas. Cobb-Douglas production function was developed by Cobb and Douglas in 1928 which is a fundamental function even now in both Macroeconomics and Microeconomics. The Cobb-Douglas production function is normally utilized by economists in the direction of explaining the correlation between contributions of resources involved in production such as labour, capital and technology.Cobb-Douglas production function and constant elasticity of substitution functions are playing a significant role for analysis in economics.
Cobb-Douglas production function is still universally used toward the analysis of productivity and growth (Felipe and Adams, 2005). Felipe and Adam accepted as true that Paul Douglas is one of the economists who deserved a Novel Price for his marvelous works. Cobb and Douglas suggested that elasticity of substitution between capital and labour should be constant or equals to one even though they did not specify ...
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....worldbank.gov. (2011). Data on Gross Domestic Product and Total employment of South Africa. World Bank.
http://www.southafricanreservebank.co.za. (2011). Data on Fixed Capital Stock of South Africa. South African Reserve Bank
Mankiw, NG. (1995). “The Growth of the Nations”. Brookings paper of economics activities. pp 275-326
Mankiw, NG. (2005). Macroeconomics, International edition. Worth Publishers: New York
Mankiw, N.G (2013) Principle of Macroeconomics 7th edition. Congage Learning: United States of America
Romer, P.M. (1986). Increasing returns and long run growth. Journal of political economy Vol 94. Pp 1002-37
Romer, P.M. (1990). Capital, Labour and productivity. Journal of political economy Vol. 98, No 5: university of Chicago. Pp 339341
Solow, R.M (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics. Pp 65-94
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