The data in this set are derived from a recent sample of data of companies from the FAME database.&n

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

The data in this set are derived from a recent sample of data of companies from the FAME database. 

1. Generate summary statistics for output (measured by turnover), capital (measured by assets) and labour (measured by employees). Report and briefly describe the results. (5 marks)
2. Using scatter plots and correlation coefficients, assess the strength of the linear association between log output and each of the two inputs, log labour and log capital. (5 marks)
3. Write the linear econometric model that represents a production function in which log of output is a linear function of log of capital. Estimate the coefficients using a simple (univariate) regression OLS model. Explain your results. (5 marks)
4. Extend the model of the production function, that you wrote in your answer to Question 3, by adding log of labour into your equation and write down the extended (multivariate) model as an equation. Estimate its coefficients and explain the results. (5 marks)
5. Comment on the estimates of the output elasticity of capital obtained, estimating the univariate and multivariate regression models in Question 3 and Question 4. (5 marks)

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