4 An equation explaining chief executive officer salary is
log(salary)5 4.59 1 .257 log(sales) 1 .011 roe 1 .158 finance
(.30) (.032) (.004) (.089)
1 .181 consprod 2 .283 utility
(.085) (.099)
n 5 209, R2 5 .357.
The data used are in CEOSAL1.RAW, where finance, consprod, and utility are binary variables indicating the financial, consumer products, and utilities industries. The omitted industry is transportation.
(i) Compute the approximate percentage difference in estimated salary between the util- ity and transportation industries, holding sales and roe fixed. Is the difference statisti- cally significant at the 1% level?
(ii) Use equation (7.10) to obtain the exact percentage difference in estimated salary between the utility and transportation industries and compare this with the answer obtained in part (i).
(iii) What is the approximate percentage difference in estimated salary between the consumer products and finance industries? Write an equation that would allow you to test whether the difference is statistically significant.
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