Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

Exercise 11

A "Cobb-Douglas" production function relates production ( Q ) to factors of production, capital ( K ), labor ( L ), and raw materials ( M ), and an error term u using the equation Q = K 1 L 2 , where , 1 , and are production parameters. Suppose that you have data on production and the factors of production from a random sample of firms with the same Cobb-Douglas production function. How would you use regression analysis to estimate the production parameters