In regression (7.9.4), we presented the results of the Cobb–Douglas production function fitted to the manufacturing sector of all 50 states and Washington, DC, for 2005. On the basis of that regression, find out if there are constant returns to scale in that sector, using
a. The t test given in Eq. (8.6.4). You are told that the covariance between the two slope estimators is −0.03843.
b. The F test given in Eq. (8.6.9).
c. Is there a difference in the two test results? And what is your conclusion regarding the returns to scale in the manufacturing sector of the 50 states and Washington, DC, over the sample period?