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13.5. Consider the following true (Cobb-Douglas) production function: In Yi = do + al In Lli + a2 In L2i + a3 In Ki tui
13.5. Consider the following "true" (Cobb-Douglas) production function: In Yi = do + al In Lli + a2 In L2i + a3 In Ki tui where Y = output L1 = production labor L2 = nonproduction labor K = capital But suppose the regression actually used in empirical investigation is In Yi = Bo + Bi In Lli + B2 In Ki + ui On the assumption that you have cross-sectional data on the relevant variables, a. Will E(B1) = al and E(B2) = 03? b. Will the answer in (a) hold if it is known that L2 is an irrelevant input in the pro- duction function? Show the necessary derivations
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