ECONOMICS AND QUANTITATIVE ANALYSIS (ONLINE)
LINEAR REGRESSION REPORT
Word Limit: 1500 words Weighting: 60%
Background
In your role as an economic analyst, you have been asked the following question: how much does education influence wages? The Excel data file (wages) contains 100 observations for each of the following variables:
Variable Label Wage Earnings per hour Educ Years of education
Instructions
Conduct a simple linear regression analysis to examine the relationship between ‘education’ (the independent variable) and ‘wages’ (the dependent variable). Using the Excel data file, prepare a 1500 word report using the following structure:
Purpose (5 marks) In this section, the purpose of the report needs to be clearly and concisely stated.
Background (10 marks) In this section, write a brief overview of the association between education and earnings. Why would economists be interested in this particular issue?
Method (5 marks) In this section, provide an overview of the empirical approach used to examine the association between education and wages.
Results (25 marks) In this section, you need to present and summarize the results from your statistical analysis. In particular, the result sections must:
• Provide a descriptive analysis of the two variables (e.g., mean, standard deviation, minimum and maximum). (3 marks)
• Develop a scatter diagram with education as the independent variable. What does the scatter diagram indicate about the relationship between the two variables? (4 marks)
• Estimate a regression equation that can be used to predict the wages given the level of education. (3 marks)
• State the estimated regression equation and interpret the meaning of the slope coefficient. (3 marks)
• Is there a statistically significant association between education and wages? What is your conclusion? (3 marks)
• Did the regression equation provide a good fit? Explain. (4 marks)
• Calculate the predicted wages for a person with 12 and 14 years of education, respectively. What is the difference in the hourly wage rate? (5 marks).
