Estimation of the Production Function in the Jordanian Economy: The Case of The Private Sector

Abstract

This study aimed at estimating the production function of the economic sectors in the Jordanian private sector, based on the Cobb-Douglas function , the CES function , and the Translog function, using the Autoregressive Distributed Lag (ARDL) model for tabular data for six sectors during the period (2000- 2015). The results of the analysis showed that the model of the Cobb-Douglas production function is the most appropriate model for estimating the production function, The results of this model indicated that the economic sectors are characterized by the Constant return of scale, and tend to use the labor component more than the capital , where the production elasticity of labor reached 0.58, the elasticity of production of capital 0.49. The ECM (-1) Error Correction Model was negative and significant and was about 0.39، Which means that deviations in the short-term relationship are adjusted by returning to the long-term equilibrium track within two and a half years.      The study recommends enhancing investment in labor-intensive projects, increasing the efficiency and skill of employees، and implementing an expansionary fiscal policy based on tax reduction and increased government expenditures. Also، expanding the base of exports and development of national products، and directing the economy towards the growth of productive sectors (industrial، agricultural and technological), and directing credit facilities towards increasing the fixed capital formation of these sectors.