In order to assess the effect in one state of a casualty insurance company’s economic power on its political power, the following model was hypothesized and fitted to data from all 50 states:

where

Y = ratio of company’s payments for state and local taxes, in thousands of dollars, to total state and local tax revenues in millions of dollars 

X₁ = insurance company state concentration ratio (a measure of the concentration of banking resources)

X₂ = per capita income in the state in thousands of dollars
X₃ = ratio of nonfarm income to the sum of farm and nonfarm income
X₄ = ratio of insurance company’s net after-tax income to insurance reserves (multiplied by 1,000)
X₅ = average of insurance reserves (divided by 10,000)
Part of the computer output from the estimated regression is shown here. Write a report summarizing the findings of this study.

Transcribed Image Text:

Y = Bo + B₁X₁ + B₂X₂ + B3X3 + B4x4 + B5X5 + ε