Discussion:
From a sample of 209 ?rms, Wooldridge obtained the following regres- sion results*:
log (s-alary ) = 4.32 + 0.280 log (sales) + 0.0174 roe + 0.00024 ros se = (0.32) (0.035) (0.0041) (0.00054)
R2 = 0.283
where salary = salary of CEO sales = annual ?rm sales roe = return on equity in percent ros = return on ?rm's stock and where ?gures in the parentheses are the estimated standard errors.
a. Interpret the preceding regression taking into account any prior expec- tations that you may have about the signs of the various coef?cients.
b. Which of the coef?cients are individually statistically signi?cant at the 5 percent level?
c. What is the overall signi?cance of the regression? Which test do you use? And why?
d. Can you interpret the coef?cients of roe and ros as elasticity coef?- cients? Why or why not?