Question

In: Economics

The data set in CEOSAL2 contains information on chief executive officers for U.S. corporations. The variable...

  1. The data set in CEOSAL2 contains information on chief executive officers for U.S. corporations. The variable salary is annual compensation, in thousands of dollars, and ceoten is prior number of years as company CEO. Write the steps using R Studio!

    1. (a) Find the average salary and the average tenure in the sample.

    2. (b) How many CEOs are in their first year as CEO (that is, ceoten = 0)? What is the longest tenure as a CEO?

    3. (c) Plot scatter plot for log(salary) and ceoten with log(salary) on the y- axis and ceoten on the x-axis. Also plot a line fit on top of the scatter plot. Based on this, do you see negative or positive relationship between log(salary) and ceoten?

    4. (d) Estimate the simple regression model
      log(salary) = β0 + β1ceoten + u

      and report your results in the usual form. What is the (approximate) predicted percentage increase in salary given one more year as a CEO?

Solutions

Expert Solution

(a) Average Salary = 865.8644 thousands of dollars

Average Tenure = 7.955 years

(b)  Number of CEOs who are in their first year as CEO = 5

Longest tenure as a CEO = 37 years

(c) The scatter plot shows a slight positive relationship between log(salary) and ceoten. It is shown below:

(d) The estimated regression equation is

log(salary)^ = 6.505 + 0.009724 * ceoten

The (approximate) predicted percentage increase in salary given one more year as a CEO is 0.9724%.

The regression output is shown below:

The R-code for the answers is given below:

Rahul Sunny answered 1 year ago
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