In an eort to model executive compensation for the year

Chapter 12, Problem 12.56

(choose chapter or problem)

In an eort to model executive compensation for the year 1979, 33 rms were selected, and data were gathered on compensation, sales, prots, and employment. The following data were gathered for the year 1979. Compensation, y Sales, x1 Prots, x2 EmployFirm (thousands) (millions) (millions) ment, x3 1 2 3 4 5 6 7 8 9 $450 387 368 277 676 454 507 496 487 $4600.6 9255.4 1526.2 1683.2 2752.8 2205.8 2384.6 2746.0 1434.0 $128.1 783.9 136.0 179.0 231.5 329.5 381.8 237.9 222.3 48,000 55,900 13,783 27,765 34,000 26,500 30,800 41,000 25,900 (cont.) Compensation, y Sales, x1 Prots, x2 EmployFirm (thousands) (millions) (millions) ment, x3 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 $383 311 271 524 498 343 354 324 225 254 208 518 406 332 340 698 306 613 302 540 293 528 456 417 $470.6 1508.0 464.4 9329.3 2377.5 1174.3 409.3 724.7 578.9 966.8 591.0 4933.1 7613.2 3457.4 545.3 22,862.8 2361.0 2614.1 1013.2 4560.3 855.7 4211.6 5440.4 1229.9 $63.7 149.5 30.0 577.3 250.7 82.6 61.5 90.8 63.3 42.8 48.5 310.6 491.6 228.0 54.6 3011.3 203.0 201.0 121.3 194.6 63.4 352.1 655.2 97.5 8600 21,075 6874 39,000 34,300 19,405 3586 3905 4139 6255 10,605 65,392 89,400 55,200 7800 337,119 52,000 50,500 18,625 97,937 12,300 71,800 87,700 14,600 Consider the model yi = 0 + 1 lnx1i + 2 lnx2i + 3 lnx3i +i,i =1 ,2,...,33. (a) Fit the regression with the model above. (b) Is a model with a subset of the variables preferable to the full model?