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Economics

Problem

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*:

W = 7.5 + 0.009N (1)

t = n.a. (16.10) R2 = 0.90

W /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 (2)? Was he worried about heteroscedasticity? How do you know?

*See Dominick Salvatore, Managerial Economics, McGraw-Hill, New York, 1989, p. 157/

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M92799521

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