Activity I – Last year, your firm collected data on each of its 107 division managers. The data contain growth figures for each manager’s division, the manager’s tenure with the firm, and the manager’s score on a leadership test, which was administered firmwide. These data are contained in the file attached.
Run a regression designed to determine the effect of manager tenure on division growth.
What role, if any, can the manager’s leadership test score play in the regression you ran for Part a? Explain.
Activity II – Use the data in the attached for this question.
You are working as an analyst for a large cable company that offers bundles of channels all across the United States. One of the bundles is the “basic package,” which includes network channels along with a few other basic cable channels. You are interested in learning how the price of this basic package influences the rate of subscriptions in a market. You have data on subscriptions per 1,000 local residents, price for the basic package, and average local household income. You also have data on local telecom labor costs per subscriber. You believe this last variable influences the local price but not subscriptions per se.
Based on the data provided, write out an expression for the data-generating process for subscriptions per 1,000 local residents.
Estimate the effect of basic package price on subscriptions per 1,000 local residents using OLS. Why might you distrust this result as being a causal effect?