Question: Consider the following models: ln Y i = 1 + 2 ln X i + u i ln Y i

Consider the following models:

ln Y∗i = α1 + α2 ln X∗i + u∗i

ln Yi = β1 + β2 ln Xi + ui

where Y∗i = w1Yi and X∗i = w2Xi , the w’s being constants.

a. Establish the relationships between the two sets of regression coefficients and their standard errors.

b. Is the r2 different between the two models?

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