Ohio has had an urban enterprise zone program in operation for the past 5 years. Local governments are free to set up three types of zones to attract new industry: zone A (businesses are exempt from taxes for 10 years), zone B (industries are exempt from taxes for 10 years, and they may use tax-free industrial development bonds), and zone C (the local government contributes to the capital investment of the industry). Local governments can set up one and only one type of urban enterprise zone. The state wants to know the impact of the zones on local unemployment rates (Y). To do this, it set up a dummy variable X1 (coded 1 if the zone is a B-type zone and coded 0 otherwise) and another dummy variable X2 (coded 1 if the zone is a C-type zone and 0 otherwise). It wants to control for the following variables: X3, the percentage of unemployment in the counties surrounding the urban area with the zone; X4, the median education level of the urban area in years; and X5, the percentage of the urban area’s employed population that is employed in services. Y is measured in percentage unemployed. A regression for 136 cities reveals the following results:
 = 5.4 + 1.32X1 - .64X2 - .82X3 - .07X4 - .13X5
sb1 = .31 sb2 = .32 sb3 = .03 sb4 = .13 sb5 = .031
Sy|x = .62 R2 = .53 Adj. R2 = .51
Interpret all slopes, the intercept, and R2. Analyze the slopes, including tests of significance, and express in clear English what this regression reveals. Youngstown has a zone C enterprise zone, with unemployment in the surrounding counties of 8.9%, median education of 10.8 years, and 31% of the city’s employed working in services. What is your best guess of the percentage of unemployment in Youngstown?

  • CreatedNovember 11, 2015
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