An Application of the Cobb-Douglass Production Function in the Quantitative Assessment of the Productivity of a Manufacturing Firm in Nigeria

Abstract

The focus of this study is the use of the Cobb-Douglas’ production function to evaluate the productivity of a manufacturing firm. In order to achieve our aim, secondary data of the production line of the firm, were used. These data include the production output data and cost data, which covered a period from 1991to 2010. A production frontier was established for every manufacturing year using the production function. Business cycle was also used to analyze the deviation between the actual production and the production frontier. The results indicated that for 80 percent of the years under study, the firm operated above the production frontier, and therefore considered technically efficient for those years, with the exception of the years 1994, 2005, 2007 and 2008 where the firm operated below the production frontier. Also the deviation between the actual production and the production frontier followed the business cycle. The trend of actual production curve showed that there is a tendency of low productivity in the future.