*Billions of Drachmas at constant 1970 prices "•"Thousands of workers per year.

Source: I am indebted to George K. Zestos of Christopher Newport University, Virginia, for the data.

a. See if the Cobb-Douglas production function fits the data given in the table and interpret the results. What general conclusion do you draw?

b. Now consider the following model:

Output/labor = A( K/L)P eu where the regressand represents labor productivity and the regressor represents the capital labor ratio. What is the economic significance of such a relationship, if any? Estimate the parameters of this model and interpret your results.

7.23. Refer to Example 3.3 and the data given in Table 2.6. Now consider the following models:

a. ln (hwage ) = p1 + p2 ln (education ) + P3(ln education )2 + ui where ln = natural log. How would you interpret this model? Estimate this model, obtaining the usual statistics and comment on your results.

b. Now consider the following model:

ln (hwage) = p1 + p2 ln (education) + p3 ln (education2) + ui


If you try to estimate this model, what problem(s) would you encounter? Try to estimate this model and see if your software package can estimate this model.

7.24. Monte Carlo experiment: Consider the following model:

You are told that 01 = 262, ft = -0.006, ft = -2.4, a2 = 42, and u ~ N(0, 42). Generate 10 sets of 64 observations on ui from the given normal distribution and use the 64 observations given in Table 6.4, where Y = CM, X2 = PGNP, and X3 = FLRto generate 10 sets of the estimated 0 coefficients (each set will have the three estimated parameters). Take the averages of each of the estimated 0 coefficients and relate them to the true values of these coefficients given above. What overall conclusion do you draw?

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Rules Of The Rich And Wealthy

Rules Of The Rich And Wealthy

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