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Data on Labor Productivity and Unit Labor Costs Were Obtained

Question 15

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Data on labor productivity and unit labor costs were obtained for the retail industry
from 1987 through 2006 (Bureau of Labor Statistics). A regression was estimated to
describe the linear relationship between the two variables.
a. Based on the plot of residuals versus predicted values, is the linear model
appropriate? Explain.
b. Would a re-expression of the data help? If so, what would you recommend? Data on labor productivity and unit labor costs were obtained for the retail industry from 1987 through 2006 (Bureau of Labor Statistics). A regression was estimated to describe the linear relationship between the two variables. a. Based on the plot of residuals versus predicted values, is the linear model appropriate? Explain. b. Would a re-expression of the data help? If so, what would you recommend?

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a.The residual plot shows a clear patter...

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