In a regression of average wages (W, $) on the number of employees (N) for a random
Question:
In a regression of average wages (W, $) on the number of employees (N) for a random sample of 30 firms, the following regression results were obtained:
Ŵ = 7.5 + 0.009N …………………………… (1)
t = n.a. (16.10) R2 = 0.90
Ŵ/N = 0.008 + 7.8(1/N) ……………………. (2)
t = (14.43) (76.58) R2 = 0.99
a. How do you interpret the two regressions?
b. What is the author assuming in going from Eq. (1) to Eq. (2)? Was he worried about heteroscedasticity? How do you know?
c. Can you relate the slopes and intercepts of the two models?
d. Can you compare the R2 values of the two models? Why or why not?
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a As equation 1 shows as N increases by a unit on average wages ...View the full answer
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