Question

In: Economics

1.Describe the log-linear regression model and how it is used to measure the elasticity of the...

1.Describe the log-linear regression model and how it is used to measure the elasticity of the dependent variable with respect to an explanatory variable.

2.Describe how to measure the growth rate of the dependent variable using the semi-log regression model.

3.Describe the linear trend regression model.

4.Describe the standardized regression model.

Expert Solution

Log linear regression model:

Consider the following model,Yi=Xie.The above model is known as exponential regression model.Where are regression coefficients,ui is error term,'e' is value of exponential.e=2.718,Xi is a independent variable.Here the regression model is linear in variable.S we have to transform the model to make it a linear form.

lnYi=lnlogxi=ui where ln is natural log,ie,log to the base e.If the assumption of classical LRM are fulfilled the parameters above model are explained by OLS method.

ln .This model is linear in parameter and ,linear in logarithm of variables and can be explained by OLS method.Because of this linearity,such models are called log-log or double log or log linear model.

One attractive feature of this model is the slope coefficient of the elasticity of Y with respect to X.ie,percentage change in Y for a given percentage change in X.

In short,Equation of the model:

Slope: (Y/X)

Elasticity:

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exp 32ui

Bland 32

1+ 2

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1+ 2

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Rahul Sunny answered 1 hour ago

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1.Describe the log-linear regression model and how it is used to measure the elasticity of the...

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