Abstract - The Information Society 3 (3)

Information as a Factor of Production: Substitutability and Productivity

Yale M Braunstein

The Cobb-Douglas production function may not adequately show whether manufacturing firms are efficiently using information resources. The Cobb-Douglas production function relates either output or value added to inputs. However, the formulation assumes that the elasticities of substitution between each pair of inputs is constant and that this elasticity is equal to unity. However, the assumption of a constant elasticity of substitution between all pairs seems unwarranted. One must also consider the problems in estimating production functions from industry data and the simultaneity problems caused by the use of inputs and outputs in a single equation model when the direction of causality is not clear. Information of all sorts apparently is underutilized by manufacturing firms, and an excess of in-house information is produced to complement the underinvestment in information purchased from outside the firm.

View Full Text | Subscribe Online


Back | TIS Home