Specification of production functions for analyzing technical change and factor inputs in agricultural development

This paper focuses on some vital issues involed in specifying the number of variables to be included in agriculture's production function and on the functional form that the agricultural production function should assume in the context of a computable general equilibrium model. When land and intermediate inputs (seeds and fertilizers) as well as capital and labor are included, modeling the agricultural sector can best be done in a more disaggregated format than simple Cobb-Douglas or CES specifications. After examining the transcendental logarithmic production function, the paper proposes to adopt ‘nested’ CES specifications on the basis of empirically observed elasticities of substitution.