s, you run the following re- gression on a sample of 65 countries for the year 2012:
books = 8.2314 + (1.0329)
+ 0.3149 age (0.4111)
8.1391 (0.5812)
?
income
4.8121 (0.3543)
+
ereaders,
3.4125 educ (0.7314)
where books is the number of paperback novels purchased in 2012, income is per capita GDP in 2012, educ is the average number of years of education for the population in 2012, age is the average age of the population in 2012 and ereaders is the number of electronic readers (e.g. Kindles) sold in 2012. The numbers in parentheses refer to standard errors corresponding to the estimated coefficients. You also find that R2 = 0.7231 and SSR = 1, 231.
(a) Which of the slope coefficients are statistically different from zero at the 5% level of significance? Perform statistical tests to answer this question. [8 marks]
Solution: Each test carries 2 marks. t ratios are: 14.0039, 4.66, 0.7659, -13.5819. The 2.5% critical value for a tn?k=65?5=60 distribution can be seen to be 2.0000, implying that all coefficients except the one on age are significant.
(b) Does the intercept have a plausible interpretation? Explain briefly. [4 marks]
Solution: The intercept indicates that demand for paperback novels equals 8.2314 when income, educ, age and ereaders all equal zero. Clearly this is not plausible.
(c) Construct a 95% confidence interval for the coefficient on age. [8 marks]
Solution: CI is given by [bage