A Cobb-Douglas production function relates production ((Q)) to factors of production-capital ((K)), labor ((L)), and raw materials

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A Cobb-Douglas production function relates production \((Q)\) to factors of production-capital \((K)\), labor \((L)\), and raw materials \((M)\) - and an error term \(u\) using the equation \(Q=\lambda K^{\beta_{1}} L^{\beta_{2}} M^{\beta_{3}} e^{u}\), where \(\lambda, \beta_{1}, \beta_{2}\), and \(\beta_{3}\) are production parameters. Suppose you have data on production and the factors of production from a random sample of firms with the same Cobb-Douglas production function. How would you use regression analysis to estimate the production parameters?

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Introduction To Econometrics

ISBN: 9780134461991

4th Edition

Authors: James Stock, Mark Watson

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