In the Cobb-Douglas production function $Y = K ^ { a } L ^ { 1 - a }$ , if a = 1/3, then:
A) labor's share of GDP is two-thirds
B) labor's share of GDP is one-third
C) capital's share of GDP is two-thirds
D) capital's share of income is one
E) labor's share of income is three

Question

Quizplus · Accepted Answer

In the Cobb-Douglas production function, the exponent of labor (L) represents labor's share of GDP. If $a = 1/3$, then $1-a = 2/3$, meaning labor's share is two-thirds.

In the Cobb-Douglas Production Function Y=KaL1−aY = K ^ { a } L ^ { 1 - a }Y=KaL1−a

In the Cobb-Douglas Production Function $Y = K ^ { a } L ^ { 1 - a }$