Production Behaviors of Manufacturing Industries in Bangladesh

Whenever the production process increases slowly the usual production function i.e. having multiplicative error term do not behave well for forecasting purpose. In this situation Cobb-Douglas type production function with additive errors may be applicable. In this regard the estimation procedure is to be complicated. Hence non-linear estimation procedures are applicable. However both Cobb-Douglas type function with multiplicative and additive errors are to be estimated here. Different model selection criteria show that Cobb-Douglas type production function with additive errors is more suitable for forecasting the industrial production in Bangladesh.