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Double labor - PowerPoint PPT Presentation

CHAPTER

5. x. ECONOMETRICS. x. CHAPTER. x. x. x. Functional Forms and Regression Models. The X and Y variables do not have to be linear. (The model must be linear in parameters.). ?. Y i = B 1 + B 2 ln(X i 2 ) + u i. This is okay, even though it is not linear in the

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Cobb – Douglas Production Function: Y = K a L (1-a) a < 1, say a = kapital share of Y = 1/3

Cobb – Douglas Production Function: Y = K a L (1-a) a < 1, say a = kapital share of Y = 1/3. Show constant returns to scale: Double both inputs  Double outputs Show decreasing returns to capital: Double capital but leave labor constant  dY/dK=? Show decreasing returns to labor:

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Double labor - PowerPoint PPT Presentation

CHAPTER

Cobb – Douglas Production Function: Y = K a L (1-a) a &lt; 1, say a = kapital share of Y = 1/3

Cobb – Douglas Production Function: Y = K a L (1-a) a < 1, say a = kapital share of Y = 1/3