1. Consider production function of the form Q= f(H, K), where Q is the output measure...

1. Consider production function of the form Q= f(H, K), where Q is the output measure and H and K are hours worked and gross capital stock, respectively. Based on 33 observations we obtain the following results:
?og(?) = 0.129 + 0.448 ?og (?) + 0.559 ?og (?)
(Standard Error) (0.546) (0.704) (0.816)

R²= 0.886
a. Interpret the regression results.

b. What is the output elasticity of hours worked?

c. Verify that the coefficients of log(H) and log(K) are statistically insignificant at the 5% level.

d. What might account for the insignificance of log(K) and log(H) if you are told that the correlation coefficient between log(H) and log(K) is 0.980?

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Expert Solution

orchestra answered 1 year ago

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