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.

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Definitions:

Commitment

The state or quality of being dedicated to a cause, activity, or relationship, reflecting a sense of responsibility and loyalty.

Psychosocial Moratorium

A period during adolescence when individuals are allowed to explore various roles and identities without having to commit to any one identity.

Adolescence

The phase of physical and mental growth typically experienced between puberty and reaching the age of majority.

Identity Confusion

A psychological state characterized by uncertainty, disorientation, or conflict about personal beliefs, values, and goals, often occurring during developmental transitions.