You own a chain of retail stores and are interested in the impact of training yo

Question

You own a chain of retail stores and are interested in the impact of training your sales associates on sales. You have the following data for n stores over T years, say n=200 and T= 4: You don't have any data on field store attributes. All stores had the same store manager and didn't go through any renovations during the four years. Consider the following regression model. Sales_it = alpha_i + lambda_t + beta_1 training_it + beta_2 customers_it + beta_3 staff_it + mu_it Suppose that store managers decide whether their sales associates receive training or not in a given year. What aspect of the above regression model accounts for this selection? Explain your answer. During the four years, there was a major recession in the U.S., where all the stores are located. What aspect of the above regression model ensures that this doesn't bias the estimates of the effect of training? Explain your answer. What if we accidently lost the first three years' observations, and we estimate the following model using the OLS regression: sales_i = alpha + beta_1 training_i + beta_2 customers_i + beta_3 staff_i + mu_i Given the assumption listed in part (a) is still valid, will the OLS estimator of be unbiased? Please explain why.

Explanation / Answer

a) The term for the training is beta1 * trainingit. So the sales variable also depends on this term for the output. Let us say beta1 is positive and then ideally the sales manager should give training because then the term is positive and will boost the sales. If beta1 is negative then the sales will decrease if training =1

b) The term for recession which determines the staff working in the company is beta3 * Staffit. The coefficient beta3 averages out the impact of staff on sales and at the same time adds the effect of staff on the sales.

c) It will be unbiased because when the exogeneity assumption holds the estimators of the coefficients are also unbiased.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.