Problem
In a regression of average wages (W, $) on the number of employees (N) for a random sample of 30 firms, the following regression results were obtained*: W = 7.5 + 0.009N (1) t = n.a. (16.10) R2 = 0.90 W /N = 0.008 + 7.8(1/N) (2) t = (14.43) (76.58) R2 = 0.99.
a. How do you interpret the two regressions?
b. What is the author assuming in going from Eq. (1) to (2)? Was he worried about heteroscedasticity? How do you know? *See Dominick Salvatore, Managerial Economics, McGraw-Hill, New York, 1989, p. 157(can i have a solution please)