Lisa Fisher is a business school professor who would like to analyze university factors that enhance innovation. She collects data on 143 universities in 2008 for a regression where the response variable is the number of startups

(Startups), which is used as a measure for innovation. Lisa believes that the amount of money that a university directs towards research (Research) is the most important factor influencing Startups. She estimates Startups as a function of Research and obtains Two other explanatory variables are also likely to influence Startups: the number of patents issued (Patents), and the age of its technology transfer office in years (Duration). Lisa then includes these additional variables in the model and obtains At the 5% significance level, should Lisa include Patents and Duration in the model predicting Startups?

2 2. F IL E A researcher interviews 50 employees of a large manufacturer and collects data on each worker's hourly w age (Wage), years of higher education (EDUC), experience

(EXPER), and age (AGE). A portion of the data is shown below; the entire data set can be found on the text website;

labeled Hourly Wage.

Wage EDUC EXPER AGE

$37.85 11 2 40 21.72 4 1 39 24.18 8 11 64

a. Estimate: Wage = β 0 + β 1 EDUC + β 2EXPER + β 3AGE + ε .

b. The researcher wonders if the influence of experience is different from that of age, or if β 2 ≠ β 3. Specify the competing hypotheses for this test.

c. What is the restricted model given that the null hypothesis is true? Estimate this model.

d. At the 5% significance level, can you conclude that the influence of experience is different from that of age?