Suppose you are working on a project in a small village with 100 families. You noticed that the children from families with higher incomes tend to have more years of schooling. Suppose you had data on family incomes and the average number of years of schooling of the children in the families.In fact, when you did a regression analysis, you produced the following results:
Log S = 3.2 + .3 log Income + ε
a)how would you interpret the above results?
b)give an example in which the correlation is the result of reverse causation.
c)why is determining the direction of causality important in this example?
d)give an example in which the correlation is the result of an omitted variable
How closely do government expenditures measure opportunity cost for each of the
following program inputs? Please explain your answer.
a) Land to be used for a nuclear waste storage facility, which is owned by the
government and located on a military base.
b) Labor for a reforestation program in a small rural community with high unemployment.
c) Labor of current government employees who are required to administer a new program.
d) Concrete that was previously poured as part of a bridge foundation.