Answer to Question #275128 in Economics for arianna

Question

Use the uploaded dataset titled ‘ceosal2’ to model the relationship between company’s CEO salary and sales. The variables are defined as the following: Y = CEO’s salary, in thousands of dollars X1 = firm sales, in millions of dollars X2 = company’s market value, in millions of dollars X3 = years of tenure as CEO with the company Now, consider the following model specifications: 𝑙𝑛 𝑌 = 𝛼0 + 𝛼1𝑙𝑛𝑋1 + 𝑢 (1) l

n 𝑌 = 𝛽0 + 𝛽1𝑙𝑛𝑋1 + 𝛽2𝑙𝑛𝑋2 + 𝛽3𝑋3 + 𝑣 (2)

The basic specification (equation 1) tests the effect of firm sales on CEO’s salary (both in logarithmic form). The basic model can be extended to include logarithm of firm market value and CEO’s tenure with the company that are expected to increase CEO’s salary.

a. Estimate both equations and present in tabular format without using outreg2. Include columns for standard errors and t-statistics.

Answer 1

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