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In econometrics, stochastic frontier analysis deals with models of production and with estimation of firm's efficiency. Suppose there are two firms in an industry each

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In econometrics, stochastic frontier analysis deals with models of production and with estimation of firm's efficiency. Suppose there are two firms in an industry each using three production factors, X1 (labor), X2 (capital) and X3 (land). You observe 12 observations on each firm's output Y as well as X1, X2 and X3. You are tasked with determining whether the same production function is appropriate for both firms. It is common to assume that production happens according to the Cobb-Douglass production function: Y = AX X, X1-- e, where A, a, B, y are the unknown parameters of the production function and & is a random disturbance. Because your data in positive you take the log transformation and obtain a linear model for each firm: In Y = B + aln X1 + yln X2 + (1-a-y) In X3 +E. You estimate the linear model for each firm and put all your parameter estimates into one vector 0. You construct an F- test using the general form: LO = C. What are the degrees of freedom of this test? Explain your reasoning

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