Estimate the production function using linear regression

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Reference no: EM132659658

In this assignment you are going to test whether aggregate manufacturing in the United States exhibits increasing, decreasing or constant returns to scale using data from the 2016 Annual Survey of Manufactures. The Excel file provided includes data on output (measured in $ value), capital expenditures and labor expenditures for each of the 50 states plus the District of Columbia.

We will assume that manufacturing is described by the Cobb Douglas production:

QK,L=β0Kβ1Lβ2e

Question 1: Estimate the production function using linear regression (convert the Cobb Douglas function into a form that can be estimated with linear regression. You will need to convert the data in the Excel file to match the transformation needed before estimating the regression).

Question 2: Test whether the coefficients on capital and labor are statistically significant.

Question 3: Determine the percentage of variation in output that is explained by the regression.

Question 4: Determine the labor and capital estimated parameters and give an economic interpretation of each value.

Question 5: Determine whether this production function exhibits increasing, decreasing or constant returns to scale.

Reference no: EM132659658

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