What is the financial impact of pollution abatement on small firms? The U.S. government’s Small Business Administration studied this and reported the following model.
Pollution abatement>employee = -2.494 - 0.431
Ln(Number of Employees) + 0.698 ln(Sales)
Pollution abatement is in dollars per employee.
a) The coefficient of ln(Number of Employees) is negative. What does that mean in the context of this model? What does it mean that the coefficient of ln(Sales) is positive?
b) The model uses the (natural) logarithms of the two predictors. What does the use of this transformation say about their effects on pollution abatement costs?