Essay
Consider the following Cobb-Douglas production function
(where Y is output, A is the level of technology, K is the capital stock, and L is the labor force), which has been linearized here (by using logarithms) to look as follows:
Assuming that the errors are heteroskedastic, you want to test for constant returns to scale. Using a t -statistic and "Approach #2," how would you proceed.
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