Problem Set 2
Dueat9:20a.m.onThursdayJan26
This problem set asks you to replicate and extend the analysis by Hayashi and Nerlove of cost
functions for electricity generation. Note that data sets for Hayashi’s text can be downloaded from
http://fhayashi.fc2web.com/datasets.htm
The data set for this problem can be obtained in either ASCII format
http://fhayashi.fc2web.com/hayashi%20econometrics/ch1/NERLOVE.ASC
or Excel spreadsheet
http://fhayashi.fc2web.com/hayashi%20econometrics/ch1/nerlove.xls
This text file has data on 145 electric utility companies in 1955 for the following:
Column 1: total costs (call it
TC
in millions of dollars
Column 2: output (
Q
) in billions of kilowatt hours
Column 3: price of labor (
PL
)
Column 4: price of fuels (
PF
Column 5: price of capital (
PK
)
Note that Columns 4 and 5 are in reverse order to that reported in equation (1.7.7) in Hayashi’s
text– in equation (1.7.7), the price of capital
p
i
2
is the nexttolast variable and the price of fuel
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 Spring '08
 Hamilton,J
 Null hypothesis, Commaseparated values, Stata data file

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