HypothesisTesting

HypothesisTesting - Regression Analysis and Hypothesis...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Regression Analysis and Hypothesis Testing Ch1 Appendix pp.16-19
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Hypothesis Testing • Most of the predictions of economic theory are in the form of: the effect one economic variable (independent) will have on another economic variable (dependent), all else equal. • These predictions are sometimes called comparative statics. • Example: – Economic theory predicts that if the price of oil increases, then the sales of hybrid vehicles will also increase. (Because they are substitutes.) • P O => Q HV *
Background image of page 2
More Labor Examples • A person with more education will earn higher wages than a person with less education, all else equal. • Years of Schooling => wages • A construction worker who works on the top of a skyscraper will earn higher wages than a construction worker who works on two story townhouses, all else equal. • Safety => wages
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Hypothesis Testing • All economic predictions of this form can be tested in generally the same way. • I will use the example from Ehrenberg and Smith appendix 1A to review hypothesis testing. • Prediction: A firm paying higher wages will have a lower voluntary labor turnover rate (or quit rate) than a firm paying lower wages. • wages => quit rate
Background image of page 4
Data • To test our hypothesis we need “firm level” data on wages and quit rates. • Hypothetical Data, 1993: 10 12 6 15 10 5 20 8 4 30 8 3 35 6 2 40% 4 1 Annual Quit Rate Average Hourly Wage Firm
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Data • Our data is considered cross-sectional data because it focuses on a particular point in time. • Data that follows a group of firms or individuals over time is called time-series data.
Background image of page 6
• A graph of the data shows that there is an apparent negative correlation between wages and quit rates. 2 4 6 8 10 12 average wage, W
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 17

HypothesisTesting - Regression Analysis and Hypothesis...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online