1Output refers to real gross domestic product in the sector.

2Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an estimate of wages, salaries, and supplemental payments for the self-employed.

Source: Economic Report of the President, 1999, Table B-49, p. 384.


a. Plot Y against X for the two sectors separately.

b. What is the economic theory behind the relationship between the two variables? Does the scattergram support the theory?

c. Estimate the OLS regression of Y on X. Save the results for a further look after we study Chapter 5.

3.21. From a sample of 10 observations, the following results were obtained:

£Y = 1110 Y^Xi = 1700 Y^XiYi = 205,500 Y^X2i = 322,000 £y2 = 132,100

with coefficient of correlation r = 0.9758. But on rechecking these calculations it was found that two pairs of observations were recorded:

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