Question: Interpreting the regression model. (The data are in the file GermanHealth) This question and its subparts are based on a subset of health care data from Germany, just to mix things up a bit!

The variables are:

HEALTH = survey question: On a scale of 0 to 10, how do you feel about your health?

INCOME = household income, in $100,000 Euro increments

MARRIED = 0 if the person is not married, 1 if they are

FEMALE = 0 if the person is not female, 1 if they are

KIDS = 0 if there are no children in the household, 1 if there are

WORKING = 0 if the person is not working, 1 if they are.

Please answer the following questions:

1. Write out a regression equation regressing INCOME(dependent variable) on AGE and EDUC.
2. Run this regression in Excel. Report the intercept (constant) and the coefficients for AGE and EDUC. Put these values into your regression equation in a.
3. How many observations are there in the sample?
4. What is the sample standard deviation of the variable INCOME?
5. What is the R2 in the model? What the R2 measure?
6. Does this set of results give a convincing description of a relationship between INCOME and (AGE,EDUC) ? Are any of the relationships statistically significant?
7. How do you interpret the coefficient EDUC on INCOME? Put this relationship into words.
8. Since one must grow a year older in order to obtain an additional year of education, how are we able to compute coefficients for both education and for age? (Hint: This is what multiple regression is all about. If you understand the answer to this question, you understand multiple regression.)

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