Consider an equation to explain wages (wage) population of people in the 2015 wo
ID: 3246761 • Letter: C
Question
Consider an equation to explain wages (wage) population of people in the 2015 workforce in Alaska in terms of years of schooling (educ): log(wage) = 0.28 + 0.096educ n = 364, R2 = 0.178 (a) Interpret the slope estimate clearly. (b) Explain the meaning of R^2 = 178 clearly. (c) Is this estimated equation used a cross-sectional data set or a time series data set? Explain clearly. (d) Now, consider an equation to explain salaries of CEOs in Alaska in terms of annual firm sales: log(salary) = 0.43 + 0.254 log(sales) n = 364, R^2 = 0.058 (i) Interpret the slope estimate clearly. (ii) Explain the meaning of R^2 = 0.058 clearly.Explanation / Answer
A) the slope here is 0.096
The slope tells the relationship between the dependent and independent variable..A higher slope means a higher relationship.
Here, our slope is not very much high and thus we can say that wages and years of schooling are not very much related
B) R is the coefficient of determination.. it is the square of the coefficient of correlation.. It tells us how much variation is explained by our regression model.
R close to 100% means all the variation in the model is explained by our model and the model is good fit
Here our R is only 17.8% which is not high... Hence it says that out model is not a very good fit to use and we might have many unexplained residuals in it