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:

Statement Of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Cash Flow Ratio

A liquidity ratio that measures a company's ability to cover its short-term liabilities with its cash flows from operations.

Total Assets

Total Assets refer to the sum of all assets owned by a company, including both current and non-current assets, indicating the total resources at a company's disposal.

Company Performance

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