Constant returns to scale in CD function

[BuddFoxx]

Not sure whether the constant returns to scale assumption for the Cobb-Douglas production function requires the Solow residual i.e. TFP to equal zero or just be a constant.
I am leaning towards zero and some of the schweser exams seem to agree.
Your thoughts?

 

[cpk123]

As I understand it - it has nothing to do with the TFP part of the equation.
If both Labor and Capital increase by x - then the GDP increases by x since
alpha * x + (1-alpha)*x = x.
This is mentioned in the footnote Pg 136
and the text itself on the same page
If we assume that the production function exhibits constant returns to scale (i.e., a given percentage increase in capital stock and labor input results in an equal percentage increase in output), we can substitute beta=1-alpha) into Equation 1.3

 

[cpk123]

in other words: it is beta + alpha = 1

 

[BuddFoxx]

Thanks.

 

[BuddFoxx]

Thanks.