Suppose in an attempt to estimate the effect of how listing with a real estate agent impacts a house's selling price you estimate the following regression: Price_i = 10.2 (3.2) + 2.3 (0.8) Agent + -2.9 (0.3) Distance to Downtown_i, where Distance to Downtown is a proxy variable, which can be used to control for the desirability of the location, and the standard errors for each coefficient are reported in parenthesis. How should we interpret the regression results for the coefficient on Agent? A) The unconditional correlation between housing prices and house sales with a listing agent are positive. B) The unconditional correlation between whether a listing is listed with an agent and how far it is from downtown is negative. C) Listings with an agent sell for higher prices holding fixed the desirability of the location of the listing. D) None of the answers is correct.

Question

Quizplus · Accepted Answer

The coefficient on Agent, which is positive (2.3), indicates that listings with an agent sell for higher prices, holding fixed the distance to downtown. This is the only interpretation that is consistent with the coefficient on Agent. The other options do not take into account the control variable, Distance to Downtown, and do not reflect the impact of Agent on the price of houses.

Suppose in an Attempt to Estimate the Effect of How