An Empirical Multivariate Time Series Analysis of the United States’ Production Function

Abstract

This paper attempts to empirically review the United States’ production function.The impact of hours worked/capital that is average weekly hours of production divided by capital stock, annual government total expenditures divided by capital stock as government expenditure/capital, inflation rate and relative price of gasoline as proxy for energy on output/capital which is GDP divided by capital stock in United States. 40 years of annual data from 1975 to 2015 is collected for each variable. Co-integration and VECM model with several diagnostic tests has been conducted in this study. However, only hours worked/capital and relative price of gasoline were significant at the beginning but inflation rate and government expenditure/capital were