22 Jul IS IT ECONOMICALLY LARGE?
of sales. Sa Show more The variable rdintens is expenditures on research and development (R&D) as a percentage of sales. Sales are measured in millions of dollars. The variable profmarg is profits as a percentage of sales. Using the data in RDCHEM.RAW for 32 firms in the chemical industry the following equation is estimated: r ?dintens = .472 + .321 log(sales) + .050 profmarg (1.369) (.216) (.046) n = 32 R^2 = .099. (i) Interpret the coefficient on log(sales). In particular if sales increases by 10% what is the estimated percentage point change in rdintens? Is this an economically large effect? (ii) Test the hypothesis that R&D intensity does not change with sales against the alternative that it does increase with sales. Do the test at the 5% and 10% levels. (iii) Interpret the coefficient on profmarg. Is it economically large? (iv) Does profmarg have a statistically significant effect on rdintens? Show less
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