Application of Non-Linear Cobb-Douglas Production Function with Autocorrelation Problem to Selected Manufacturing Industries in Bangladesh

Abstract

In developing counties, efficiency of economic development has been determined by the analysis of industrial produc tion. An examination of the characteristic of industrial sector is an essential aspect of growth studies. The growth of a country can be measured by Gross Domestic Product (GDP). GDP is substantially affected by the industrial output. In dustrial gross output is mainly a function of capital and labor input. If the effect of labor and capital input to output is at a satisfactory level in an industry or in a group of industries, then industrial investment will increase. As a result, the number of industries will increase, which will directly affect GDP and also will decrease the unemployment rate. This is why, industrial input-output relationship is so important for any industry as well as for the overall industrial sector of a country. To forecast the production of a firm is necessary to identify the appropriate model. MD. M. Hossain et al . [1] have shown that Cobb-Douglas production function with additive errors was more suitable for some selected manu facturing industries in Bangladesh. The main purpose of this paper is to detect the autocorrelation problem of Cobb- Douglas production model with additive errors. The result shows that autocorrelation is presented in some manufactur ing industries. Finally, this paper removes the autocorrelation problem and re-estimates the parameters of the Cobb- Douglas production function with additive errors.