Productivity Development in Selected Central European Countries Measured by the Sato Production Function

Issue: 4/2018

Lenka Roubalová

Mendel University in Brno, Faculty of Business and Economics, Department of Statistics and Operation Analysis, Zemědělská 1, 613 00 Brno, Czech Republic,
e-mail: xkravack@node.mendelu.cz

Lenka Viskotová

Mendel University in Brno, Faculty of Business and Economics, Department of Statistics and Operation Analysis, Zemědělská 1, 613 00 Brno, Czech Republic,
e-mail: lenka.viskotova@mendelu.cz

In this paper, we investigate the relationship between economic output, labour and capital in the Visegrád Four, Austria and Germany. The main objective is to determine the type of technological progress in these countries over time, specifically in the period 1995–2015. The Sato production functions (a special case of the linearly homogeneous production function) for all the aforementioned countries are estimated using linear and nonlinear techniques. In addition to the original Sato production function, we propose modifying it in using a time variable, which allows us to analyse the development of productivity over time. Based on the NLS estimates of this modification, we create isoquant maps and calculate the value of the marginal rate of technical substitution of labour for capital to identify the nature of technological progress typical for each country. We also compare the properties of both the OLS and NLS estimates. The results are quite specific to individual countries, but there is some room for generalization.

Pages: 
353-370
DOI: 10.2478/revecp-2018-0018
JEL: O47, D24, C51
Keywords: technological progress, Sato production function, production function, nonlinear least squares method, isoquants
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