Estimation Of A Production Function Of Brazil With Domestic And Foreign Capital Stock, 1991-2017

We estimate a Cobb-Douglas production function distinguishing between a domestic and a foreign capital stock built from data of imported machinery and transport equipment for Brazil. Some autoregressive models (AR(I)MAX) in log levels are estimated by the nonlinear General Method of Moments. The elasticity of production of foreign capital is about 40% of that of domestic capital; the function has about constant returns to scale in capital and labour variables, and human capital and technical change are also highly productive. Estimations based on preferred ARDL models and FMOLS yield higher elasticities of production for foreign capital goods. Having more observations in the future will allow better exploitation of the automatic lag length choice.