CHULALONGKORN UNIVERSITY FACULTY OF ECONOMICS
2946653 Research Methods in Labour Economics and Human Resource Management
EXERCISE 4 INSTRUCTION
1. This exercise is due on Friday 23rd December. Please leave your script at my o¢ ce (Room 402 Economics Building).
2. You can download the data sets fromhttp://pioneer.netserv.chula.ac.th/~tsaksit.
3. If you have any problem, you can stop by my o¢ ce or send me an e-mail.
Question 1: Cobb-Douglas Production Function (From Gujarati 2003)
Consider the following Cobb-Douglas production function Yi = 0Li1Ki2e"i where
Y = output L= labour input K =capital input
" =stochastic disturbance term e= base of natural logarithm
Using dataset6.xls to …nd the OLS estimators and answer the following questions 1. Find the output elasticities of labour and capital. Explain how do you …nd the answer.
2. Test whether the partial coe¢ cients you obtain from the OLS regression are signi…cantly di¤erent from zero.
3. Perform the overall test of signi…cance.
Question 2: Electricity Consumption
Fromdataset2.xls, consider the following regression ELECHHt= 0+ 1GDPt+"t
1. Find the OLS estimators.
2. If you want to know whether the weather during summer has any e¤ect on electricity consumption, you can add a dummy variable to the above model. Suppose the summer takes place during the second quarter. Write down the new model with the dummy variable.
3. Find and interpret the OLS estimator of this dummy variable’s coe¢ cient and test whether the estimated coe¢ cient is statistically di¤erent from zero.
4. Does adding the dummy variable improve the model?
5. What is the dummy variable trap?
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