Cobb-Douglas Production Function
The Cobb-Douglas production function is a formulation of the production function, typically given inputs of labor and capital.
Formulation
The basic Cobb-Douglas function is:
Y(L,K) = ALaKb
Where...
L is labor and K is capital, the classical economic inputs
A is total factor productivity, essentially the catch-all residual term, generally thought of as intrinsically-productive technology or human capital
a and b represent output elasticities, generally thought of as technological effects on specific inputs' efficiencies, somewhere in the non-inclusive range of 0 and 1.
History
This production function was developed by Charles Cobb and Paul Douglas. They fit decades of aggregated U.S. economic data to this model and estimated the output elasticities for the U.S. economy.