Please answer all 5 questions with steps explaining how you got the answers.

Please view attached photos as well.

In this assignment you are going to test whether aggregate manufacturing in the United States exhibits increasing, decreasing or constant returns to scale using data from the 2016 Annual Survey of Manufactures.The Excel file provided includes data on output (measured in $ value), capital expenditures and labor expenditures for each of the 50 states plus the District of Columbia.

We will assume that manufacturing is described by the Cobb Douglas production:

QK,L=?0K?1L?2e

1.Estimate the production function using linear regression (convert the Cobb Douglas function into a form that can be estimated with linear regression.You will need to convert the data in the Excel file to match the transformation needed before estimating the regression).

2.Test whether the coefficients on capital and labor are statistically significant.

3.Determine the percentage of variation in output that is explained by the regression.

4.Determine the labor and capital estimated parameters and give an economic interpretation of each value.

5.Determine whether this production function exhibits increasing, decreasing or constant returns to scale.

Use this updated google drive link to the excel spreadsheet that includes the DATA needed

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https://docs.google.com/file/d/1lUriafKC025f5v3wpW5nZ_BIj48j7vb2/edit?usp=docslist_api&filetype=msexcel

7-8c The Cobb-Douglas Production Function A somewhat simpler case is the Cobb-Douglas production function that has returns to scale determined by the sum of the parameters {,61 + ,63} in the equation: Q = (II/'3' K52 [7-15] If ,61 + ,83 is less than, equal to, or greater than 1, the Cobb-Douglas production function will exhibit decreasing, constant, or increasing returns, respectively. The multiplicative exponential Cobb-Douglas function can be estimated as a linear regression relation by taking the logarithm of Equation 7.16 to obtain logQ =loga+1 log L+,82]ogK [7-17] Thus, once the parameters of the Cobb-Douglas model are estimated, the sum of the exponents of the labor {,61) and capital {g} variables can be used to test for the presence of increasing, constant, or decreasing returns to scale