Suppose that data on labour productivity and unit labour costs were obtained for the retail industry from 1990 through 2009. A regression was estimated to describe the linear relationship between the two variables.
a. Based on the plot of residuals versus predicted values, is the linear model appropriate? Explain. b. Would a re-expression of the data help? If so, what would you recommend?

Question

Suppose that data on labour productivity and unit labour costs were obtained for the retail industry from 1990 through 2009. A regression was estimated to describe the linear relationship between the two variables.
a. Based on the plot of residuals versus predicted values, is the linear model appropriate? Explain.  b. Would a re-expression of the data help? If so, what would you recommend?

Quizplus · Accepted Answer

The Answer of Suppose that data on labour productivity and unit labour costs were obtained for the retail industry from 1990 through 2009. A regression was estimated to describe the linear relationship between the two variables.
a. Based on the plot of residuals versus predicted values, is the linear model appropriate? Explain.  b. Would a re-expression of the data help? If so, what would you recommend?

Suppose That Data on Labour Productivity and Unit Labour Costs