Definition of CES Production Function

Definition: CES stands for constant elasticity of substitution. This is a function describing production, usually at a macroeconomic level, with two inputs which are usually capital and labor. As defined by Arrow, Chenery, Minhas, and Solow, 1961 (p. 230), it is written this way:

V = (beta*K^-rho + alpha*L^-rho) -^(1-rho) where V = value-added, (though y for output is more common),
K is a measure of capital input,
L is a measure of labor input,
and the Greek letters are constants. Normally alpha > 0 and beta > 0 and rho > -1. For more details see the source article.

In this function the elasticity of substitution between capital and labor is constant for any value of K and L. It is (1+rho)^-1.(Econterms)

Terms related to The CES Production Function:

• Capital
• Labor
• Elasticity of substitution
• CES technology
• CES utility

About.Com Resources on The CES Production Function:
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Writing a Term Paper? Here are a few starting points for research on The CES Production Function:

Books on The CES Production Function:

• Sargent, Thomas J. 1979. Macroeconomic Theory. New York: Academic Press.

Journal Articles on The CES Production Function:
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