Example

TEACHER'S SALARY IN RELATION TO REGION AND SPENDING ON PUBLIC SCHOOL PER PUPIL

From the data in Table 9.1, the results of the model (9.4.1) are as follows: Y = 13,269.11 - 1673.51402 - 1144.15703, + 3.2889X, se = (1395.056) (801.1703) (861.1182) (0.3176)

where* indicates p values less than 5 percent, and ** indicates p values greater than 5 percent.

As these results suggest, ceteris paribus: as public expenditure goes up by a dollar, on average, a public school teacher's salary goes up by about $3.29. Controlling for spending on education, we now see that the differential intercept coefficient is significant for the Northeast and North-Central region, but not for the South. These results are different from those of (9.2.5). But this should not be surprising, for in (9.2.5) we did not account for the covariate, differences in per pupil public spending on education. Diagrammatically, we have the situation shown in Figure 9.2.

Note that although we have shown three regression lines for the three regions, statistically the regression lines are the same for the West and the South. Also note that the three regression lines are drawn parallel (why?).

306 PART ONE: SINGLE-EQUATION REGRESSION MODELS

EXAMPLE 9.3 (Continued)

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