Hi! Im going thru old exams and I'm having the hardest time solving this one, can someone please help? Thank you!

Question: Using a Cobb-Douglas production function we can express output (Y) for firm i as =

1

where K is capital and L labor. In official statistics K, L and a measure of Y is

available and can be used to estimate firm level Ai, or in words: the firm level TFP (Total Factor Productivity). Simplifying a lot, this is essentially the type of estimation performed in a paper by Chang-Tai Hsieh and Pete Klenow (2009), "Misallocation and manufacturing TFP in China and India", Quarterly Journal of Economics. The figure below (Hsieh- Klenow 2009, p 1417) plots the distribution of the estimated TFP's for three countries.3