Consider the Following Cobb-Douglas Production Function $Y _ { i } = A K _ { i } ^ { \beta _ { 1 } } L _ { i } ^ { \beta _ { 2 } } e ^ { u _ { i } }$

question 20

Essay

Consider the following Cobb-Douglas production function $Y _ { i } = A K _ { i } ^ { \beta _ { 1 } } L _ { i } ^ { \beta _ { 2 } } e ^ { u _ { i } }$
(where Y is output, A is the level of technology, K is the capital stock, and L is the labor force), which has been linearized here (by using logarithms) to look as follows:
$y _ { i } = \beta _ { 0 } ^ { * } + \beta _ { 1 } k _ { i } + \beta _ { 2 } l _ { i } + u _ { i }$
Assuming that the errors are heteroskedastic, you want to test for constant returns to scale. Using a t -statistic and "Approach #2," how would you proceed.

---

Definitions:

Selectively Providing

The strategy of offering resources or information to specific groups or individuals based on certain criteria or needs.

Structuring Events

Key occurrences or interventions that shape the direction, dynamics, or framework within which activities and processes operate.

Technological Change

Refers to the process of innovation and the adoption of new or improved technologies, products, or processes within an organization or society.

Work Needs

Requirements or necessities that individuals seek to fulfill through their employment, such as income, satisfaction, and development opportunities.