In a study of turnover in the labor market, James F. Ragan, Jr., obtained the following results
Question:
In a study of turnover in the labor market, James F. Ragan, Jr., obtained the following results for the U.S. economy for the period of 1950–I to 1979–IV.* (Figures in the parentheses are the estimated t statistics.)
ln Ŷt = 4.47 – 0.34 lnX2t + 1.22 X2t + 1.22 ln X4t
(4.28) (-5.31) (3.64) (3.10)
+ 0.80 ln X5t - 0.0055 X6t R̅2 = 0.5370
(1.10) (-3.09)
where
Y = quit rate in manufacturing, defined as number of people leaving jobs voluntarily per 100 employees
X2 = an instrumental or proxy variable for adult male unemployment rate
X3 = percentage of employees younger than 25
X4 = Nt−1/Nt−4 = ratio of manufacturing employment in quarter (t − 1) to that in quarter (t − 4)
X5 = percentage of women employees
X6 = time trend (1950–I = 1)
a. Interpret the foregoing results.
b. Is the observed negative relationship between the logs of Y and X2 justifiable a priori?
c. Why is the coefficient of ln X3 positive?
d. Since the trend coefficient is negative, there is a secular decline of what percent in the quit rate and why is there such a decline?
e. Is the R̅2 “too” low?
f. Can you estimate the standard errors of the regression coefficients from the given data? Why or why not?
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