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st: Interpretation of Translog production function


From   "Sunhwa Lee" <qlee@ucdavis.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Interpretation of Translog production function
Date   Sat, 29 Sep 2007 01:29:43 -0700 (PDT)

Dear Stata-users,
My question is not related to Stata, but to general econometrics. I have 
an interpretational problem regarding coefficients of a Translog 
production function. The model is to see an effect of a regulatory 
variable on GDP:

lnY = b + bK*lnK + bL*lnL + bKK*(lnK)^2 + bLL*(lnL)^2 
      + bR*lnR + bRK*(lnR)*(lnK) + bRL*(lnR)*(lnL)
where R is for regulatory proxy and b's are for coefficient estimates. 

Q1) The data are divided into geographic groups. For most groups, bK and 
bLL got negative signs whereas bKK and bL are positive. Do the 
coefficients for capital--convexity w.r.t capital-- make an economic 
sense? 

Q2) Suppose that the above model as a whole gains a statistical 
significance over a restricted Cobb-Douglas model through a chi-square 
test, while some of variables are not significant. 
To calculate marginal effects of lnL, I use the first derivative of lnY 
w.r.t. lnL, that is, bL + 2*bLL*(lnL) + bRL*(lnR).
If bL is not significant, then should I drop or keep bL to calculate the 
marginal effect of lnL on lnY?

Any comments are welcomed.

Sun H.

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