7. 1006 Let us consider the following Cobb-Douglas production function P, A, LPK2e", Where P = level of output, L= quant

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7 1006 Let Us Consider The Following Cobb Douglas Production Function P A Lpk2e Where P Level Of Output L Quant 1 (135.22 KiB) Viewed 12 times

7. 1006 Let us consider the following Cobb-Douglas production function P, A, LPK2e", Where P = level of output, L= quantity of labor, K = quantity of capital, and Ao is constant. Brand B₂ are two parameters. Y,= In(P), B.- In(A), X₁, In(L), X2i = In(K₁), y=(Y.-Y) X₁=(Xur-X) X21=(X₂1-X) The following calculations are given from the data of Real GDP, capital, and labor for 20 years. Eyx= 1.3474 Eyx=2.7115, Ex=0.6759, Ex-2.6745, Exx2= 1.3212 Y = 12.2261, X₁=9.3024, X₂ = 12.6691 Estimate the regression equation. Interpret the value of B₁ and B₂ What can you say about the output elasticity with respect to labor and output elasticity of the capital? Which one is more elastic? Interpret R² = 0.995080. What can you conclude about the returns to scale of this economy? And why?