A Production Function Explanation of Irish Economic Growth 1951-1984
JEL Classification O41, O49
Mahmud Sadeg
Department of Economics, Trinity College, Dublin 2, Ireland.
Abstract
This paper provides a first attempt at an explanation of Irish
economic growth along the lines proposed by the neo-classical growth theory.
Production function estimates for gross domestic product are provided using both
Cobb-Douglas and constant elasticity of substitution production functions. A
wide range of econometric testing is employed and an error correction mechanism
is used to investigate the long-run property of the estimated equation. Both
functional forms are estimated using a constant and variant forms of technical
progress, and under the assumption of constant and variant returns to scale.
Statistical tests show an error correction model is possible only in the case of
the Cobb-Douglas production function however the tests illustrate the
superiority of the unrestricted Cobb-Douglas production function with the
constant rate of technical progress. The result shows an elasticity of output
with respect to capital and labour of about 0.34 and 0.67 respectively.
Technical progress have a positive contribution to growth rate of output of 1.7%
a year.
Acknowledgements
The author would like to thank Prof. Martin O'Donoghue
for the detailed reading and very useful comments which he provided. He is also
indebted to Mr. Mike Harrison for his many valuable comments on some of the
econometric work. Thanks are also due to Eric Strobl, Kevin Hanrahan and Aidan
Meyler for comments on earlier drafts of the paper. The author alone is to be
blamed for any mistakes. An earlier version of this work was presented as part
of a paper to the Ninth Annual Conference of the Irish Economic Association,
Cavan, May 1995..