Test if the iq variable is a significant determinant of

Reference no: EM13473431

Suppose an economist specifies a "human capital" model in which earnings or income is the dependent variable, and years of education and IQ are the independent variables. Income is represented by Y, IQ by X1, and years of education by X2. The underlying theory behind the model is that IQ and education should both have an impact on the earnings of individuals. The data (hypothetical) available to test this theory are presented in this table.

Income-IQ-Education Table

Income (Y) IQ (X1) Education (X2)

$5000 80 9

6000 95 8

7000 100 10

8000 101 10

9000 103 11

10000 115 14

11000 105 15

12000 116 13

13000 120 16

14000 110 17

a) Estimate the regression equation

b) Conduct the significance of the regression test (alpha = 5%)

c) Calculate R^2

d) Test if the IQ variable is a significant determinant of changes in income (alpha = 1%). Do the same for education (alpha = 5%)

e) Find the point estimate of income when IQ = 120 and education = 16.

Reference no: EM13473431

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