Rogelio Alicor L.

Panao
139009
GSAS
Assignment (c2.2 and c2.4 of Wooldridge)
C2.2
1. Average salary and average tenure:
a. Average salary = $865,860 per year (since the variable salary is annual
and measured in thousands of dollars)
b. Average tenure = 7.95 years
2. Number of CEOs on their first year (ceoten = 0): 5
The longest tenure of a CE0: 37 years
3. Estimation of the sample regression model: log(salary) = 0 + 1(ceoten) + u
log(salary) ^ = 6.5 + .0097(ceoten)
(.068) (.0064)
n = 177 R2= 0.01316, p = 0.1284 at = 0.05
This means that for each additional year of service as CEO there is an
approximate corresponding increase in annual salary of about 1 percent (.97
percent to be precise). But tenure explains only about 1.32 percent about salary
(R2= .01316), and is not statistically significant as predictor.
C2.4
1. a. Average salary: $957.95 per month
b. Average IQ score: 101.28
c. Sample standard deviation of IQ: 15.05
2. Regression model: wage = 0 + 1(IQ) + u
wage^ = 116.99 + 8.3 (IQ)
(85.64) (0.836)
n = 935; R2 = .0955; p = .0000 at = 0.05
This model shows that a one-point change in IQ changes wage by approximately
$8.30. Therefore, a 15 point increase in IQ can increase monthly salary by $124.50.
IQ in this model explains about 9.55% of wage; the p-value of wage as predictor
is statistically significant. However, this also shows that IQ alone is not a very strong
predictor of wage. IQ by itself, in other words, cannot strongly account for how much one
earns.

3. Model where a one point increase in IQ has the same percentage effect on wage:
log(wage) = 0 + 1(IQ) + u
log(wage)^ = 5.89 + .088 (IQ)
(0.890) (0.00086)
n = 935; R2 = 0.099; p = .0000 at = 0.05
In this model, a one point increase in IQ has a corresponding effect of 8.8%
percent increase in wage. Therefore, a 15 point increase in IQ can more than
double ones predicted salary, an increase in wage by approximately 132 percent.
In this model, IQ explains about 10 percent of wage rate (9.9%). The p-value for
IQ as predictor is statistically significant.
Appendix
For problem C2.2
Tabulation of CEOTEN
Included observations: 177
Number of categories: 28

Value
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
24
26
28
34
37

Count
5
19
10
21
21
10
11
6
11
8
8
4
7
7
5
2
2
2
1
2
4
1
1
3
2
1
1
2

Percent
2.82
10.73
5.65
11.86
11.86
5.65
6.21
3.39
6.21
4.52
4.52
2.26
3.95
3.95
2.82
1.13
1.13
1.13
0.56
1.13
2.26
0.56
0.56
1.69
1.13
0.56
0.56
1.13

Cumulative
Count
5
24
34
55
76
86
97
103
114
122
130
134
141
148
153
155
157
159
160
162
166
167
168
171
173
174
175
177

Cumulative
Percent
2.82
13.56
19.21
31.07
42.94
48.59
54.80
58.19
64.41
68.93
73.45
75.71
79.66
83.62
86.44
87.57
88.70
89.83
90.40
91.53
93.79
94.35
94.92
96.61
97.74
98.31
98.87
100.00

Total

177

100.00

177

100.00

SALARY

CEOTEN

Mean
Median
Maximum
Minimum
Std. Dev.
Skewness
Kurtosis

865.864406779661
707
5299
100
587.5892811549555
2.998602775995999
20.40128569476557

7.954802259887006
6
37
0
7.150825770051403
1.639671538759147
6.084020221321012

Jarque-Bera
Probability

2498.437734694761
0

149.4563791236825
0

Sum
Sum Sq. Dev.

153258
60765964.74576272

1408
8999.638418079098

Observations

177

177

Dependent Variable: LOG(SALARY)

Method: Least Squares
Sample: 1 177
Included observations: 177
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
CEOTEN

6.505498
0.009724

0.067991
0.006364

95.68165
1.527797

0.0000
0.1284

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.013163
0.007523
0.603775
63.79531
-160.8405
2.334164
0.128368

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

6.582848
0.606059
1.840006
1.875895
1.854561
2.083519

For C2.4
WAGE

IQ

Mean
Median
Maximum
Minimum
Std. Dev.
Skewness
Kurtosis

957.9455
905.0000
3078.000
115.0000
404.3608
1.199259
5.696661

101.2824
102.0000
145.0000
50.00000
15.05264
-0.340425
2.977035

Jarque-Bera
Probability

507.4271
0.000000

18.07990
0.000119

Sum
Sum Sq. Dev.

895679.0
1.53E+08

94699.00
211627.5

Observations

935

935

Dependent Variable: WAGE

Method: Least Squares
Sample: 1 935
Included observations: 935
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
IQ

116.9916
8.303064

85.64153
0.836395

1.366061
9.927203

0.1722
0.0000

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.095535
0.094566
384.7667
1.38E+08
-6891.422
98.54936
0.000000

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

957.9455
404.3608
14.74529
14.75564
14.74924
1.802114

Dependent Variable: LOG(WAGE)

Method: Least Squares
Date: 09/29/11 Time: 12:19
Sample: 1 935
Included observations: 935
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
IQ

5.886994
0.008807

0.089021
0.000869

66.13071
10.13020

0.0000
0.0000

R-squared
Adjusted R-squared

0.099091
0.098126

Mean dependent var

S.D. dependent var

6.779004
0.421144

S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.399948
149.2412
-468.8531
102.6210
0.000000

Akaike info criterion

Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

1.007172
1.017526
1.011120
1.792763