The variable rdintens is expenditures on research and development (R&D) as a percentage of sales. Sales are measured in millions of dollars. The variable profmarg is profits as a percentage of sales.
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160 Part 1 Regression Analysis with Cross-Sectional Data
Using the data in RDCHEM.RAW for 32 firms in the chemical industry, the following equation is estimated:
coordintens 5 .472 1 .321 log(sales) 1 .050 profmarg
(1.369) (.216) (.046)
n 5 32, R2 5 .099.
(i) Interpret the coefficient on log(sales). In particular, if sales increases by 10%, what is the estimated percentage point change in rdintens? Is this an economically large effect?
(ii) Test the hypothesis that R&D intensity does not change with sales against the alter-native that it does increase with sales. Do the test at the 5% and 10% levels.
(iii) Interpret the coefficient on profmarg. Is it economically large?
(iv) Does profmarg have a statistically significant effect on rdintens?