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Unformatted text preview: Solutions to Problem Set #3 1. (i) Intuition suggests that schools with higher ranking offer a better education and, therefore, a brighter future career. So rank (where “1” is the best) is negatively correlated with the log of starting salary. (ii) 1 > β . The higher the LSAT score the better performance in this field is expected so LSAT is expected to be positively correlated with salary. 2 > β . Like SAT, GPA would be expected to be indicator of better performance in law and therefore command higher salary. 3 > β because an increase in number of books in the library makes information more accessible to students and therefore creates better trained lawyers. 4 > β because a higher tuition would suggest a higher quality school with better training and access to higher paying jobs after graduation. (iii) GPA alary s Δ • = Δ 248 . ) ˆ log( . With change in GPA equal to one the expected would be 24.8%. That is, a one point increase in GPA would be expected to increase salary 24.8% on average. expected to increase salary 24....
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- Spring '08