The following table gives data on
real gross product, labor input, and real
capital input in the Taiwanese manufacturing
sector.
(a) Fit the following models to the preceding data:
Yt = £]1 + £]2X2t + £]3X3t + £]4X4t + £]5X5t + Ut
lnYt
= £]1 + £]2lnX2t
+ £]3lnX3t + £]4lnX4t
+ £]5lnX5t + Ut
(Eviews)
(Rats)
(b) Which model give a better fit and why? (Suggested Answer)
(c) For the log-linear model £]1
and
£]2
give,
respectively, the output elasticities with respect to
labor and
capital. How would you compute similar elasticities for the linear model?
(Suggested
Answer)
(d) How would you compare the R2
values
of the two models? (Show your calculations)
(Suggested
Answer)
(e) How do the result for the manufacturing
sector differ from those for the agricultural sector given
in table
7.3? (Suggested Answer)
(f) What assumption are made about
the disturbance term in the log-linear model? How do you
test these
assumptions? (Suggested
Answer)
