Considering the Cobb Douglas production function as the initial function to start with.
We regress that to Ln y = ln a + ln b1 k + ln b2 L
Now we state in the hypothesis that ( h0; ) b1=b2=b3 = 0 is equal to zero
And the alternative hypothesis is that it's not equal to zero.
Considering the ' not equal to zero ' u might expect a two tail test because it can be either positive or negative. But since were' talking about Capital and Labor, we expect those 2 variables to have a positive! effect on output.
Can we therefore say that it's better to use a 1 - tail test?