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Unformatted text preview: Elluminate 7 Among the conditions for the production function are positive marginal product and concavity (positive derivatives and negative definite or negative semidefinite hessian matrix) As a starting point, I generate a sample of 150 observations using a quadratic production function. A0 41.0569 A12 0.3610 (31.9353) (0.1012) A1 2.8010 A13 0.0524 (4.0867) (0.1115) A2 15.4518 A220.2386 (1.515) (0.0228) A3 5.8894 A23 0.0720 (1.1206) (0.0258) A110.6406 A330.2949 (0.1844) (0.0277) The idea is to resample the dataset, keeping the observations which are concave. The alternative is to directly impose the constraint that the eigenvalues are less than zero. 0.4264 0.1607 0.0000948  = The student of economic theory has been taught to write where L is the quantity of labor, C is a quantity of capital, and O is the rate of output of commodities. He is instructed to assume all workers alike, and to measure L in man hours of labour; He is told something about the indexnumber problem involved in choosing a unit of output; and Then is hurried on to the next question, in hope that he will forget to ask in what units C is measured. Before ever he does ask, he has become a professor, and so sloppy habits of thought are handed on from one generation to another. ( 29 , O f L C = The question is certainly not an easy one to answer....
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 Spring '09
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