In a study of chief executive officers salaries of 177 U.S. companies, suppose we assume the population model is given by where salary is CEO salary and sales is the annual sales of the comp
economics multi-part question and need the explanation and answer to help me learn.
5 part econometrics question:
In a study of chief executive officers salaries of 177 U.S. companies, suppose we assume the population model is given by where salary is CEO salary and sales is the annual sales of the company. An OLS regression gives the following estimated regression line: log(salary) = 4.96 + 0.224 log(sales) ; n=177, R^2 = 0.281
(i)Interpret the coefficient estimate on log(sales).
(ii)What other factors may affect a CEOs salary (think of at least one such factor)? How is the factor correlated with (positively or negatively)? Also explain why you think the positive/negative correlation exists.
(iii)What is the zero conditional mean assumption for the given population model (write an equation representing the assumption)? Interpret intuitively the meaning of the zero conditional mean assumption using your own words in the context of this study. (To simplify interpretation, you can assume sales take on only two possible values, say, 1 million vs 2 million, in your interpretation.)
(iv)What is the definition for causal effects in this course? Do you think the simple regression above uncovers the causal effect of log(sales) on log(salary) ? Explain intuitively as well as formally.
(v) Discuss the size of the R-squared in the regression.
Requirements: Answer questions thoroughly
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