Tashkent institute of finance “Statistics and econometrics” department subject of econometrics phd jumayev Akbar Makhmudovich

TASHKENT INSTITUTE OF FINANCE “Statistics and econometrics” department subject of ECONOMETRICS PhD Jumayev Akbar Makhmudovich

Simple regression Plan: 1. Log-log models 2. Log-linear models 3. Linear-log models

4 lecture

1 example

• FOOD_EXP ¼ weekly food expenditure by a household of size 3, in dollars
• INCOME ¼ weekly household income, in $100 units

1. The correlation is positive, indicating a positive association between food expenditure and income. The sample correlation measures the strength of the linear association, with a maximum value of 1. The value r 0,62 indicates a non-negligible but less than perfect fit. 2. We conclude that 38.5% of the variation in food expenditure (about its sample mean) is explained by our regression model, which uses only income as an explanatory variable

The interpretation is ‘‘If weekly household income increases by $1 then we estimate that weekly food expenditure will increase by about 10 cents.’’ There is nothing mathematically wrong with this, but it leads to a discussion of changes that are so small as to seem irrelevant. An increase in income of $100 leads to an estimated increase in food expenditure of $10.21, as before, but these magnitudes are more easily discussed.

• The interpretation is ‘‘If weekly household income increases by $1 then we estimate that weekly food expenditure will increase by about 10 cents.’’ There is nothing mathematically wrong with this, but it leads to a discussion of changes that are so small as to seem irrelevant. An increase in income of $100 leads to an estimated increase in food expenditure of $10.21, as before, but these magnitudes are more easily discussed.

• We can say that a 1% increase in income will increase food expenditure by approximately $1.32 per week, or that a 10% increase in income will increase food expenditure by approximately $13.22

The CPS is a monthly survey of about 50000 households conducted in the United States by the Bureau of the Census for the Bureau of Labor Statistics. The survey has been conducted for more than 50 years

• The CPS is a monthly survey of about 50000 households conducted in the United States by the Bureau of the Census for the Bureau of Labor Statistics. The survey has been conducted for more than 50 years

Wage and education

Wage and education

• We estimate that an additional year of education increases the wage rate by approximately 9%.

• We estimate that the price elasticity of demand is 1.121: a 1% increase in real price is estimated to reduce quantity consumed by 1.121%.