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Unformatted text preview: Homework 4 Econometrics: ECO 721 Fall 2009 Due Thursday, November 19 You must turn in this assignment before class begins on the due date. In this and all future assignments, you are to turn in neatly written answers to all questions. Photocopies are not acceptable. Loose pages will not be accepted. You must use a staple or paper clip. 1 . The Stata &le airlinecosts.dta contains data on indexes of variable costs ( variablecost ), output ( seatmiles ) and prices of labor ( pricelabor ), materials ( pricematerials ) and fuel ( pricefuel ) for 23 airlines ( name ) for a maximum period of 13 years ( years ) from 1971- 1986. The dataset contains 268 observations. If the production function is Cobb-Douglas, one can show that the variable cost function is of the form log c = & + ¡ y log y + ¡ L log P L + ¡ M log P M + ¡ F log P F ; where c denotes variable cost, y denotes output and P j denotes the price of input j . a . Estimate the Cobb-Douglas cost function. Interpret your coe¢ cients (discuss the sign, signi&cance and magnitude of each slope coe¢ cient). b . Write down the null hypothesis corresponding to the statement that input prices have no e/ect on costs. Test this hypothesis using an appropriate restricted regression....
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This note was uploaded on 11/12/2009 for the course ECONOMICS 721 taught by Professor Partha during the Spring '09 term at CUNY Hunter.
- Spring '09