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Exercise 1

# Exercise 1 - Economics 241B Problem Set 1 1 Scaling and R2...

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Economics 241B Problem Set 1 1. Scaling and R 2 You are studying student test scores. To determine the impact of teachers on test scores, you regress student speci°c test scores against: parents income and education, school characteristics and teacher characteristics (with a linear regres- sion). You obtain an R 2 of 0 : 30 , which you include as part of your presentation to the school board. a. One member of the board asks you to explain what R 2 indicates and whether a value of 0 : 30 is large enough for you to draw conclusions from your analysis. Please respond. b. A few moments later, a member of the audience states that parental income should be measured in increments of \$10,000 (so that an income of \$90,000 would me measured as 9). You note that your analysis measured parental income in increments of \$1,000. The audience member asks if you change the parental income measurement to units of \$10,000, would any of your reported estimates change (and, in particular, would the estimated R 2 change)? Please respond.

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Exercise 1 - Economics 241B Problem Set 1 1 Scaling and R2...

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