You are a factory manager and originally the workers are paid a fixed salary acc
ID: 3275142 • Letter: Y
Question
You are a factory manager and originally the workers are paid a fixed salary according to their skill-levels. You-want to-introduce a productivity-based-salary-in a-hope to increase-worker productivity. To-begin with, you randomly selected a group of workers according to the following table. The selected the-workers adopted the new-salary scheme in the next-month. Their average productivities-in the next month are shown-in the following table. (1) According to the data, how much-increase in monthly productivity can-you expect on average if you-implement the new salary scheme for the-whole factory? (2)-If you-want to use individual-level data and ordinary least square regression-to estimate the average influence-of the new salary scheme, how to correctly-set up the regression-model?Explanation / Answer
1.
According to the data, we can see that the average increase in productivity for males is 0.5 per person and for females is 1.5 per person. There are 50 males and 150 females.
Hence, average increase in productivity per person if the scheme is extended for the whole factory is:
(0.5*50+1.5*150)/200 = 1.25
2.
To find the average influence of the new salary scheme, the old productivity can be regressed against the new productivity for all the workers. We need to set up the intercept to zero to observe changes only due to the old and new productivity. The slope of the regression line hence is the factor by which the new productivity is mkore than the old. e.g. say we get new_prod = 1.1*old_prod by regression, then we can say than on an average the productivity has increased by 10% or 1.1 times due to the scheme.
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