# Tag Info

4

The simple answer to why the Cobb-Douglas functional form is used is because it is at least a log-linear approximation to some higher-order production function. That is, suppose you take a functional form that looks like this: $\log Y_t = f(A, K, L)$. Then a linear approximation would look like the Cobb-Douglas production function. (For a small $1\%$ ...

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OLS The OLS part is clear: $\sum_{i=1}^n y_{2i} (y_{1i} - \hat\gamma_{12} y_{2i} - \hat\beta_{11} x_{1i}) = 0$ and $\sum_{i=1}^n x_{1i} (y_{1i} - \hat\gamma_{12} y_{2i} - \hat\beta_{11} x_{1i}) = 0$, where $\hat\gamma_{12}$ and $\hat\beta_{11}$ are the OLS estimators. 2SLS For 2SLS, I will assume that $(x_{1i}, x_{2i}, x_{3i})$ is used as IV. The ...

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In general, there is no expectation that right hand side variable in a regression are in the same units. We often have combinations of variables like years of education, price, regional dummies, etc. that are all included together. So in principle, there’s no reason why you should have to convert your controls to some other scale. From a numerical ...

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