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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
In a regression of average wages (W, $) on the number of employees (N)for a random sample of 30 firms, the following regression results wereobtained*:W= 7.5 + 0.009N(1)t = n.a. (16.10) R2 = 0.90W/N = 0.008 + 7.8(1/N)(2)t = (14.43) (76.58) R2 = 0.99a. How do you interpret the two regressions?b. What is the author assuming in going from Eq. (1) to (2)? Was heworried about heteroscedasticity? How do you know?*See Dominick Salvatore, Managerial Economics, McGraw-Hill, New York, 1989, p. 157.Gujarati: BasicEconometrics, FourthEditionII. Relaxing theAssumptions of theClassical Model11. Heteroscedasticity:What Happens if the ErrorVariance is Nonconstant?© The McGraw-HillCompanies, 2004CHAPTER ELEVEN: HETEROSCEDASTICITY 429c. 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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