3)
(20 points) Compare the following two regressions:
i.
0
1
ˆ
ˆ
i
i
i
Y
X
e
ii.
0
1
ˆ
ˆ
(2
)
i
i
i
Y
X
e
Equation i. is exactly the regression we’ve been working with thus far, so all the formulas
we’ve derived thus far apply. In equation ii the independent variable has been multiplied
by 2.
How does this change, if at all, the values of
0
ˆ
,
1
ˆ
1
2
ˆ
S
, R
2
, and SSE?
,

4)
(20 points) Repeat your regression from problem 1.
This time, do it in STATA.

a)
(5) Report the values of the slope, intercept, and the R
2
.
Confirm the results are identical
to what you did in Excel.

b)
(5) Reverse the regression.
That is, switch the X and Y variables.
Report the same
results.
c)
(5) Has the value of R
2
changed?
Explain why or why not.

d)
(5) For the version of the regression where the X variable is Corruption, calculate the p-
value for a two-tailed test where the null hypothesis is β
1
= -3600.