Abstract
The Cobb-Douglas production function is often used to analyse the supply-side performance and measurement of a country's productive potential. This functional form, however, includes the assumption of a constant share of labor in output, which may be too restrictive for a converging country.
For example, labor share in the Czech Republic gradually increased over the last decade. In this paper, we test whether this fact renders the application of the Cobb-Douglas production function unreliable for the Czech economy.
We apply a more general form of production function and allow labor share to develop according to the empirical data. For the period 1995-2005, we do not find significant difference between the calculation of the supply side of the Czech economy by the Cobb-Douglas production function and a more general production function.