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| Volume 1,
No. 1, April
2002
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| Inada
Conditions and the Law of Diminishing Returns |
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| Rolf
Färe |
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| Department
of Economics, Oregon State University, U.S.A. |
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Daniel
Primont |
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| Department
of Economics, Southern Illinois University, U.S.A.
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| Abstract |
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| Inada
(1963) provided properties of the production function that are
useful in the study of economic growth. Shephard (1970a) provided
an axiomatic approach to the study of production theory. He
applied these axioms to give a formal statement of the law of
diminishing returns [(Shephard, 1970b)]. In this paper we
demonstrate that the Inada conditions and the law of diminishing
returns, as articulated by Shephard, are fundamentally
inconsistent. Thus one is forced to make a choice between the two
models when studying productivity and growth.
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Key words:
production; growth |
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| JEL
classification:
D2; O4 |
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