# Econometrics : Multiple regression Fisher and Student statistics

I am trying to estimate a production function called Cobb-Douglas.

For the period 1958 to 1972 and for the agricultural sector in Taiwan, we observed:

An: Year of observation
Y: Real production in millions New Dollars Taiwan (NDT)
L: Day of Labour, in millions
K: Real Capital in millions de NDT


We consider the following model M1: lm(formula = LY ~ LL + LK) for = 1958, ..., 1972 where the variables have been log-transformed.

1. I try to test H0: $\beta_{1}+\beta_{2}=1$ versus H1: $\beta_{1}+\beta_{2}\neq 1$ with a Fisher statistic (bilateral test)
2. I try to test the same hypothesis with a Student statistic this time.
3. I try to test (unilateral test) H0: $\beta_{1}+\beta_{2}\leq 1$ versus H1: $\beta_{1}+\beta_{2}>1$ with a Student statistic

I'm not sure if this is what you're looking for, but you can use the delta method to approximate the standard error of $\beta_{1}+\beta_{2}$:


After the regression command in R, you can type vcov(model) which gives you the variance-covariance matrix of the coefficients. The values on the diagonal of the variance-covariance matrix are the variances of the respective coefficients while the values off-diagonal represent the covariances between the corresponding coefficients.

With that you can calculate the confidence interval and the $t$-value (for a Wald-test):

$$t_{\beta_{1}+\beta_{2}}=\frac{(\beta_{1}+\beta_{2} ) - 1}{\SE(\beta_{1}+\beta_{2})}$$

And from that you can use the $t$-distribution to calculate a two- or one-sided $p$-value with 2*pt(-abs(t), df=n-1) for a two-sided $p$-value and pt(-abs(t), df=n-1)($\leq 1$) and 1-pt(-abs(t), df=n-1) ($\geq 1$) for the one-sided $p$-values. Please note that the $t$-distribution and the $F$-distribution are closely related: the square of the $t$-distribution with df degrees of freedom is the $F$-distribution with 1 numerator degree of freedom and df denominator degrees of freedom. It doesn't matter if you use the $t$-value and the $t$-distribution or the squared $t$-value and the $F$-distribution (pf(t^2, df1=1, df2=n-1)) to calculate the $p$-values. So I don't know what the difference between 1) and 2) is.

EDIT:

The R-code for the steps explained above are (it's not the fastest way but I concentrated on legibility):

1) Calculate the variance-covariance-matrix with

vcov.mat <- vocv(cobbdoug)


2) Calculate the approximate standard error of $\beta_{1}+\beta_{2}$:

se.b1b2 <- sqrt(vcov.mat[2,2] + vcov.mat[3,3] + 2*vcov.mat[2,3])


3) Calculate the $t$-value:

t.val <- ((coef(cobbdoug)[2] + coef(cobbdoug)[3]) - 1)/se.b1b2


4) Calculate the $p$-value for question 1):

2*pt(-abs(t.val), df=cobbdoug$df.residual) # assuming that you have 15 years and 3 coefficients, so df=15-3 = 12  5) Calculate the$p$-value for question 3): pt(-abs(t.val), df=cobbdoug$df.residual)

• Hi, I really thank you lots for your complete answer. But what I am looking for are the R codes. My starting R codes for the Cobb-Douglas function is : # Cobb-Douglas model LY=log(Y) LL=log(L) LK=log(K) mco=lm(Y~L+K) summary(mco) cobbdoug=lm(LY~LL+LK) What I would like to know is how to write the R codes for my 3 questions from my first mail. I already thanks you lots for your answers Looking forward to reading you – varin sacha May 7 '13 at 13:14
• I forgot to precise that I am "starting" with R. – varin sacha May 7 '13 at 13:28
• Do you have a question? – IMA May 7 '13 at 13:30
• Hi,Really thank you loads for your quick and very complete answers. Is it normal that when I write the codes in my R console I don't obtain any results except for the 2 p-value ? > vcov.mat <- vcov(cobbdoug) > > > se.b1b2 <- sqrt(vcov.mat[2,2] + vcov.mat[3,3] + 2*vcov.mat[2,3]) > > > t.val <- ((coef(cobbdoug)[2] + coef(cobbdoug)[3]) - 1)/se.b1b2 > > > 2*pt(-abs(t.val), df=12) LL 0.05915371 > > > pt(-abs(t.val), df=12) LL 0.02957686 – varin sacha May 7 '13 at 14:12
• Yes, that's normal. The other statements are assignements which means that the values are assigned to variable names with <-. I recommend that you consult an introduction to R to get familiar with R. – COOLSerdash May 7 '13 at 14:46