Cobb-Douglas

Base Model

$Y=A\ast L^{1-a}\ast K^a$ Y … output L … labor K … capital A … productivity factor (multiplier)

Assumptions

• $a,b,(1-a-b)$ are marginal factors
• diminishing returns when maximizing $a,b$
• constant returns to scale

Link to GDP

• diving both sides by Labor $L$ results in GDP per Capita
  • or $Y$ per capita if you want

with Land

sometimes a “Land” value is added to the function

$Y=A\ast L^a\ast K^b\ast T^{1-a-b}$ T … land