Question

It's often said that earnings are generally higher in urban areas than in rural areas. By why is this so? Perhaps it's because urban areas attract a cluster of employers, producing many employment opportunities. To test this possibility, a national statistics agency used census data to run a multivariate regression of weekly earnings (w) in a given location against employment in the same location (EL) and employment in the same location and the same industry (ELI). Preliminary data analysis had shown that these variables are nonlinearly related, so natural logarithms (ln) were taken before running the regression. The resulting model is given below.

ln(w)=5.525+0.0260×ln(EL)+0.0110×ln(ELI)

The P-values associated with the intercept and the two coefficients in the above equation are 0.6680, <0.001, and 0.123. The F-ratio has a P-value of 0.1160.

c) Suppose there was a 6% in EL in a specific location, but ELI remained constant. By what percentage would you expect weekly earnings to increase in that location?

Weekly earnings would be expected to increase by _____.

Answer #1

**Answer:**

**Weekly earnings would be expected to increase by
0.156%**

**Explanation:**

The regression equation is defined as,

ELI is made constant and the EL increased by 6%,

Differentiating both sides with respect to EL.

hence,

Given:

Now,

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