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ID: 3249759 • Letter: P
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7. 20. In a study of turnover in the labor market, James F. Ragan, Jr., obtained the following results for the U. S. economy for the period of 1950 I to 1979 IV. (Figures in the parentheses are the estimated t statistics. ln Y, 4.47 0.34 In X2, 1.22 ln X3t 1.22 ln Xs (3.64) (3.10) (4.28) (-5.31) 0.80 ln XS 0.0055 R2 0.5370 (-3.09) (1.10) Where: Y quit rate in manufacturing, defined as number of people leaving jobs voluntarily per 100 employees. X2 part instrumental or proxy variable for adult male unemployment rate X3 percentage of employees younger than 25 4 N-1/Ni ratio of manufacturing employment in quarter (t 1) to that in quarter (t 2) X5 percentage of women employees X6 J time trend (1950 I 1)Explanation / Answer
Answer to part a)
The study relates to turnover in the labor market. The model so obtained describes how the predictor variables: Male unemployment rate , percent of employed under 25 yrs, Ratio of manufacturing employment , percent of women employees and time trends, help us predict the turnover rate.
The model has a R square value of 0.5370. This means that all the predictor variables together are able to explain only 53.7% of the variation in the "turnover rate".
The model helps us to some extent to predict and understand the underlying causes of the increasing turnover rate.
.
Answer to part b)
The negative relation is easily justifiable . If the market male employment rate increases , this means that the market male unemployment rate decreases. This implies that there are other jobs available in the market . Ths causes the employee to switch from this company to another, Thus leading to a higher turnover rate.
Thus decreasing male unemployment rate , causes the turnover to increase.
The vice versa is also true, if there i higher rate of unemployment for males in the market , the employees will not get better otpions outside, hence they stick to their jobs, leading to a lower turnover rate.
.
Answer to part c)
Coefficent of X3 is 1.22. X3 denotes the percent of employees younger than 25
When there iss young generation that is more employeed , they are more dynamic & versatile. They keep jumping from joba to jobs, for better package and good working environment. A person who is younger than 25years has a different expectation from job , and hence their higher expectations causes they to quit the jobs more frequently as compared the more matured and experience lot.
Thus more the younger people in the workforce, higher will be the turnover rate.
.
Answer to part d)
The trend line has negative coefficient
The percent is 0.55%.
Such a decline in the turnover over a time period indicates that people are not preferring to jump frequently. They prefer to continue to work for the same company.
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