Read the following paper:
Moretti, E. (2004). Workers’ Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions. The American Economic Review, 94(3): 656-690.
And write an essay that addresses the following,
Moretti (2004) discusses a production function in equation (1). Given the production function in equation (1), explain the CMP for a given plant. Clearly describe the goal, the choice variables, the exogenous variables and the constraint. Describe the notable economic relationships that solve the CMP.
Given the production function in equation (1), suppose in the same industry and in the same year, you compare two plants. Each plant is attempting to produce the same output quota and each plant faces the same input prices. However, one plant is located in a city with a majority of college-educated workers. The other plant is located in a city with a minority of college-educated workers.
Using the CMP, which plant will have a lower total cost? Which plant will have a lower conditional input demand for at least one input?
If each firm can sell their output at the same price to consumers and each plant’s output is fixed at the same output quota, then using the PMP which plant will have higher profit?
With many plants, industries and years, what general and testable predictions emerge (i.e. what is the predicted relationship between the share of college educated people and plant productivity, total cost, employment of inputs and profit)?
Offer a brief summary of Moretti (2004). Your summary should contain the research question, the data used, the important testable hypothesis examined and the empirical findings (note the findings are on pg 667 and the paragraphs that discuss Table 3).
The essay should have the following format,
1 page minimum (at least 250 words), 4 page maximum in length. This excludes any bibliography and/or appendices.
Your writing should be from an economic perspective, not a political perspective.
Please write your paper as an essay (i.e. do not number your paragraphs 1, 2, 3 and so on), have a title, put your name and date on the paper and indent paragraphs.
Follow APA style guidelines for all references and citations.
Microsoft Word Document (.docx or .doc), 12 point Times New Roman font, 1.5 line spacing and 1 inch margins.
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