Table 8-10 on the textbook's Web site gives data on the average salary of top managers (in thousands of Dutch guilders), profit (in millions of Dutch guilders), and turnover (in millions of Dutch guilders) for 84 of the largest firms in the Netherlands. Let V = salary, X2 = profit, and X3 = turnover.
a. Estimate the following regression:
In Yi = B1 + B2In X2 + B3In X3 + ui
where In = natural logarithm.
b. Are all the slope coefficients individually statistically significant at the 5% level?
c. Are the slope coefficients together statistically significant at the 5% level? Which test would you use and why?
d. If the answer to (b) is yes, and the answer to (a) is no, what may be the reason(s)?
e. If you suspect multicollinearity, how would you find that out? Which test(s) would you use?