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6 Using data from 1988 for houses sold in Andover, Massachusetts, from Kiel and McClain (1995),
the following equation relates housing price (price) to the distance from a recently built garbage incin-
erator (dist):
log(price) = 9.40 + 0.312 log(dist)
n = 135, R2 = 0.162.
(i) Interpret the coefficient on log(dist). Is the sign of this estimate what you expect it to be?
(ii) Do you think simple regression provides an unbiased estimator of the ceteris paribus
elasticity of price with respect to dist? (Think about the city's decision on where to put
the incinerator.)
(iii) What other factors about a house affect its price? Might these be correlated with distance from
the incinerator?

Respuesta :

The study of explanatory or independent differences based on the dependent variable is a simple statistical method. The correlation between two variables is researched in which only the explanatory variable of them would be present, and the further discussion can be defined as follows:

For point (i):

  • The log(distances) seem to be optimistic, and their valuation is 0.312, which also means that the cost of a house will rise even as the distance increases.
  • In this, the certainly is what everybody expects the better the house from the sewage treatment is from a hygienic viewpoint.

For point (ii):

  • In this regard, we cannot use straightforward regression, even as non-biased price estimation might not even be provided.
  • The price-distance relationship here is not so much linear.

For point (iii):

  • Several factors influence the house's price, the biggest contributor is house length, market nearness or public areas, number of rooms, etc.
  • Thus the only influence is not the mere distance from the incinerator. It's one of the factors affecting housing pricing.
  • The proximity of markets and places can be connected to the distance from the crematorium.
  • However, factors such as house size and the number of stories aren't related to the distance from the incineration plant.

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