Generate summary statistics for labour, Capital and Output. Report and briefly describe the results

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

To answer this question, you will have to analyse the dataset Pharma.gdt which can be found in the Assessment section of the module website. The data in this set relate to the latest figures available in early 2018 for 1000 European pharmaceutical companies in the Amadeus dataset. In these data, Output is measured by turnover, Labour is measured by number of employees and Capital is measured in £1000s.

1. Generate summary statistics for labour, Capital and Output. Report and briefly describe the results

2. Using scatter plots and correlation coefficients, assess the strength of the linear association between:

o i.Output and Capital

o ii.log of Output and log of Capital.

Is the logged relationship a worse or better fit compared with the unlogged relationship? Explain your reasoning. 

3.  

o i.Write the log-linear econometric model with error term that represents a production function in which the log of Output is a linear function of log of Labour. 

o ii.Estimate and report the coefficients using a simple regression OLS model based on the given dataset. 

o iii.Explain the meaning of the term ‘elasticity’. Use your results from 3 (ii) to report the elasticity of output with respect to changes in Labour. 

4.

o i.Write a log-linear econometric model with error term that represents a production function in which the log of output is a linear function of the log of employment and the log of capital. 

o ii.Using the given data, estimate and explain the coefficients derived in in this multiple regression ordinary least squares (OLS) log-linear model.  

o iii.Compare this model of Output with the model of Output you estimated in question 3 to explain, using the R2 which is the best statistical quality.  

5.  

o i.Estimate and briefly explain the results from estimating a linear econometric model in which Output is a function of Labour and Capital. 

 

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