State Salary Spending D_{2} D_{3} SUMMARY OUTPUT

Connecticut 60,822 12,436 1 0

Illinois 58,246 9,275 1 0 Regression Statistics
Indiana 47,831 8,935 1 0 Multiple R 0.209686
Iowa 43,130 7,807 1 0 R Square 0.043968
Kansas 43,334 8,373 1 0 Adjusted R Square 0.004134
Maine 41,596 11,285 1 0 Standard Error 6696.243
Massachusetts 58,624 12,596 1 0 Observations 51
Michigan 54,895 9,880 1 0
Minnesota 49,634 9,675 1 0 ANOVA
Missouri 41,839 7,840 1 0 df SS
Nebraska 42,044 7,900 1 0 Regression 2 98985177.26481
New Hampshire 46,527 10,206 1 0 Residual 48 2152304189.48
New Jersey 59,920 13,781 1 0 Total 50 2251289366.745
New York 58,537 13,551 1 0
North Dakota 38,822 7,807 1 0 Coefficients Standard Error
Ohio 51,937 10,034 1 0 Intercept 48014.62 1857.203659231
Pennsylvania 54,970 10,711 1 0 D_{2} 1524.099 2363.139403856
Rhode Island 55,956 11,089 1 0 D_{3} -1721.027 2467.150809141
South Dakota 35,378 7,911 1 0
Vermont 48,370 12,475 1 0
Wisconsin 47,901 9,965 1 0
Alabama 43,389 7,706 0 1
Arkansas 44,245 8,402 0 1
Delaware
District of 54,680 12,036 0 1
Columbia 59,000 15,508 0 1
Florida 45,308 7,762 0 1
Georgia 49,905 8,534 0 1
Kentucky 43,646 8,300 0 1
Louisiana 42,816 8,519 0 1
Maryland 56,927 9,771 0 1
Mississippi 40,182 7,215 0 1
North Carolina 46,410 7,675 0 1
Oklahoma 42,379 6,944 0 1
South Carolina 44,133 8,377 0 1
Tennessee 43,816 6,979 0 1
Texas 44,897 7,547 0 1
Virginia 44,727 9,275 0 1
West Virginia 40,531 9,886 0 1
Alaska 54,658 10,171 0 0
Arizona 45,941 5,585 0 0
California 63,640 8,486 0 0
Colorado 45,833 8,861 0 0
Hawaii 51,922 9,879 0 0
Idaho 42,798 7,042 0 0
Montana 41,225 8,361 0 0
Nevada 45,342 6,755 0 0
New Mexico 42,780 8,622 0 0
Oregon 50,911 8,649 0 0
Utah 40,566 5,347 0 0
Washington, D.C. 47,882 7,958 0 0
Wyoming 50,692 11,596 0 0
 MS F Significance F
49492589 1.103768 0.339888
44839671

t Stat P-value Lower 95%Upper 95%Lower 95.0%

Upper 95.0%
25.85318 7.939E-30 44280.46 51748.77 44280.46 51748.77
0.644947 0.522033 -3227.311 6275.509 -3227.311 6275.509
-0.697577 0.488807 -6681.566 3239.512 -6681.566 3239.512
SUMMARY OUTPUT
These regression findings reveal that
Regression Statistics average salary for a teacher in the No
Multiple R 0.209686 for a teacher in the West is $48,015.
R Square 0.043968 these differential salaries provide a s
Adjusted R Square 0.004134 the latter two areas.
Standard Error 6696.243 Salary averages in the North Central
Observations 51 $49,539.

ANOVA Considering that the p value is close

Northeast, and the West all make aro
df SS MS F Significance F
Regression 2 98985177 49492589 1.103768 0.339888
Residual 48 2.15E+09 44839671
Total 50 2.25E+09

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 48014.62 1857.204 25.85318 7.939E-30 44280.46 51748.77 44280.46 51748.77
D_{2} 1524.099 2363.139 0.644947 0.522033 -3227.311 6275.509 -3227.311 6275.509
D_{3} -1721.027 2467.151 -0.697577 0.488807 -6681.566 3239.512 -6681.566 3239.512
 gression findings reveal that the average pay for a teacher in the South is $1,721, the
salary for a teacher in the Northeast and North Central is $524 more, and the average salary
cher in the West is $48,015. When added to the average income of Western educators,
fferential salaries provide a straightforward means of calculating the true mean salaries in
two areas.

erages in the North Central area are about $46,294 while those in the Northeast are around

ing that the p value is close to 50%, we can say that public school teachers in the South, the
t, and the West all make around the same salary on average.

Upper 95.0%
Average Annual Salary D2 D3 SUMMARY OUTPUT
9 1 0
5.5 1 0 Regression Statistics
3.8 0 0 Multiple R 0.179484
10.5 1 0 R Square 0.032215
15 1 0 Adjusted R Square 0.028528
9 1 0 Standard Error 5.070176
9.57 1 0 Observations 528
15 0 0
11 1 0 ANOVA
5 1 0 df SS MS
24.98 1 0 Regression 2 449.2407 224.6204
20.4 0 0 Residual 525 13496.01 25.70669
25 0 0 Total 527 13945.25
13.98 0 0
3.5 1 0 Coefficients
Standard Error t Stat
5 0 0 Intercept 8.814819 0.401535 21.95281
10 1 0 D2 1.099745 0.464265 2.368786
15 1 0 D3 -1.672964 0.485449 -3.446217
5.83 0 0
9.1 0 0
11.25 1 0 This average has an hourly pay of $8.81. To put it another
13 1 0 way, the average hourly pay of married people is $9.91 (=
8 0 0 $8.81 + 1.10), or around $1.10 more than the average
4.28 1 0
income of single people. In comparison, Southerners may
expect an average hourly pay of $7.14 (= $8.81 - $1.67).
7.88 1 0
6.94 0 0
24.98 0 0
10 1 0
13.75 1 0
5.62 1 0
14.67 1 0
24.98 1 0
12 1 0
15 1 0
5.77 0 0
12.65 1 0
11.71 0 0
13 1 0
12.5 1 0
22.5 1 0
11.25 0 0
15.38 1 0
7.7 0 0
11.84 1 0
5 1 0
 6.5 1 0
9 1 0
3.35 0 0
4.5 1 0
10.53 1 0
3.5 1 0
15 1 0
8.5 0 0
9.17 1 0
9.6 0 0
6.88 1 0
13.95 1 0
10 0 0
3.75 0 0
8 0 0
11.67 1 0
8.89 0 0
4 0 0
5.5 0 0
3.35 0 0
10.81 1 0
7 1 0
10 1 0
5.4 1 0
7.5 0 0
11.25 1 0
10 1 0
4 0 0
13.51 1 0
6.75 0 0
14.29 1 0
9.75 1 0
3.35 0 0
3.4 0 0
5.62 1 0
7 1 0
10 1 0
6.1 0 0
4.17 1 0
4.8 1 0
5.75 1 0
4.75 1 0
9.37 1 0
5.25 0 0
4.95 1 0
19.38 1 0
19.98 1 0
 4 0 0
5 0 0
10.58 1 0
10 0 0
7.38 0 0
12.5 0 0
4 0 0
15.03 1 0
16 1 1
3.56 0 1
4.5 0 1
4.55 0 1
3.6 1 1
8 1 1
4.75 0 1
6.73 1 1
11.11 1 1
6 1 1
10 1 1
11.25 1 1
3.95 1 1
17.5 1 1
3.55 0 1
6 0 1
22 1 1
6.25 0 1
4.5 1 1
10.32 0 1
12.2 1 1
18.16 0 1
15 1 1
8.75 1 1
19.98 1 1
6.67 0 0
9.63 1 0
5.5 1 0
8 0 0
20 1 0
9.5 1 0
11.79 0 0
13.89 0 0
5.5 1 0
7 0 0
9.65 1 0
10.61 0 0
12 1 0
8.56 1 0
16.14 0 0
3.75 0 0
9 1 0
13.12 1 0
13.2 0 0
9.25 0 0
5 0 0
6 0 0
7 1 0
4.7 1 0
7.5 1 0
7 1 0
11.22 1 0
5.71 1 0
5.5 1 0
9 1 0
4.13 1 0
10 1 0
7.5 1 0
3.65 0 0
8.89 1 0
18 1 0
3.35 0 0
13.45 0 0
22.5 1 0
19 0 0
8.93 1 0
7 1 0
4.17 0 0
9.83 1 0
6.67 0 0
7 1 0
3.64 1 0
22.83 0 0
5 1 0
22.5 1 0
12 1 0
6.28 1 0
4.5 0 0
6 1 0
6.75 1 0
8.75 0 0
13.28 1 0
6.25 1 0
8.99 0 0
7.5 0 0
12 1 0
 14 0 0
16.42 0 0
6.25 0 0
10.5 1 0
9.5 1 0
3 1 0
9.22 1 0
4 0 0
3.8 0 0
6 1 0
5 1 0
15 1 0
5.55 0 0
9 1 0
24.98 1 0
8.49 1 0
5 1 0
22.2 1 0
9.24 1 0
8 1 0
3.5 0 1
3.35 1 1
3.35 1 1
20 1 1
4 0 1
18 1 1
4.5 0 1
7.81 0 1
1.75 1 1
5.2 1 1
8.75 0 1
5 1 1
3.75 1 1
5.95 1 1
4 0 1
5 0 1
4.62 0 1
5.75 1 1
24.98 1 0
15.79 1 0
15.56 0 0
3.35 0 0
18.16 1 0
8 0 0
6 0 0
17.25 1 0
5.5 0 0
 7.65 0 0
6.25 0 0
6.4 1 0
6.58 1 0
12.5 1 0
13.33 1 0
5.5 0 0
11.25 0 0
10.62 0 0
8 1 0
10.2 1 0
5.79 1 0
7.3 1 0
44.5 0 0
10.5 1 0
9.36 1 0
5.2 1 0
4.25 1 0
15.95 0 0
22.5 1 0
5 1 1
5.3 1 1
6.25 1 1
10 0 1
5.5 1 1
6.8 1 1
3 1 1
10 1 1
4.85 0 1
9.42 1 1
6 0 1
4.25 0 1
11.02 1 1
12.16 1 1
8.43 1 1
11.43 0 1
19.98 1 1
6.88 0 1
5.71 1 0
3.35 1 0
4.85 1 0
5.75 1 0
5.4 1 0
13.16 1 0
11.32 1 0
8.75 1 0
12.22 1 0
 5.25 1 0
5.56 0 1
4.59 1 1
7.5 1 1
12 0 1
16 1 1
3.35 0 1
4.45 0 1
4.25 1 1
13.1 1 1
7 1 1
5.75 1 1
6.5 1 1
7.61 1 1
20.5 1 1
6.25 0 1
3.84 1 1
16.65 1 1
11.25 0 0
5.65 0 0
6.5 0 0
7.75 1 0
6.93 1 0
15 1 0
7 1 0
3.35 1 1
6.5 0 1
6.25 1 1
5 1 1
3.45 0 1
8.8 1 1
10 1 1
4 1 1
9.5 1 1
10.43 1 1
5.21 1 1
7.5 0 1
7 1 1
10.78 1 1
8.9 1 1
3.75 0 1
3.75 0 1
9.45 0 0
15 1 0
3.6 0 0
12 1 0
10.62 1 0
 14 1 0
5 0 0
11.5 0 0
13.71 1 0
10.62 1 1
7.45 0 1
6.75 1 1
5.87 0 1
3.43 0 1
4.35 1 1
13 1 1
3.51 1 1
4.3 0 1
5.85 1 1
6 0 0
11 1 0
21.25 0 0
14.53 1 0
6.85 0 0
10 1 0
24.98 0 1
3.75 1 1
6.5 1 1
5 0 1
4.55 0 1
6.5 0 0
10.58 0 0
9.56 1 0
12 1 0
8.5 0 0
4.1 1 0
4.5 0 0
11.5 1 0
8.9 0 0
14.21 0 0
13.65 1 0
22.2 0 0
15 1 0
8.06 1 1
6.75 1 1
4.5 1 1
7 1 1
7.5 1 1
7.5 1 1
8.5 0 1
8 1 1
3.5 1 1
 12.5 1 1
6 0 1
5.25 0 1
5 0 1
3.5 1 1
11 1 1
7.5 0 0
8.5 1 0
12.5 0 0
10.75 1 0
12.5 1 0
7.8 1 0
12 1 0
3.35 1 1
19.88 1 1
6 1 1
4.22 1 1
3.5 1 1
12 1 1
3.35 1 0
9 1 0
3.98 0 0
5 1 0
12.67 1 0
17.25 1 0
9.5 0 0
14 1 0
8.5 1 0
4.25 1 0
5.8 1 0
11.25 1 0
12 1 0
11.25 1 0
7.5 1 0
8.2 0 1
4.85 1 1
4.75 1 1
5.5 1 1
9.5 1 1
9.6 1 1
4.55 1 0
15.73 1 0
9.86 1 0
10 0 0
5.8 0 0
7.53 0 1
9.75 1 1
 13 1 1
10.28 1 1
13.45 1 1
12.57 1 0
8.63 0 0
13.26 1 0
6.85 1 0
12.47 1 0
7.14 1 0
12.5 1 0
10 1 0
10 1 0
8.75 1 0
9.37 1 0
11.11 1 0
5.1 1 0
7.5 0 0
3.4 1 0
4.5 1 0
6.25 1 0
20.55 1 0
8.4 0 0
8 1 0
8.5 1 0
3.75 0 0
9 1 0
12.05 0 0
4.5 1 0
4.8 0 0
6.5 1 0
7.69 1 0
9.33 0 0
5 1 0
6.1 1 0
10.67 0 0
3.5 0 0
10 1 0
9 0 0
7.5 1 1
5.71 0 1
8.5 0 1
4 1 1
5.75 1 1
5.25 0 0
3.5 1 0
4.5 0 0
5.5 0 0
 6.25 1 0
8.89 1 0
5.25 1 0
10.25 1 0
6.25 1 0
4.35 1 0
17.86 0 0
7.5 1 0
6.25 1 0
4.5 1 0
6.4 0 0
4.84 1 0
4.15 1 0
5.13 1 0
5.26 1 0
7.78 1 0
13.07 0 0
8 1 0
7.67 1 0
7.5 0 0
2.85 0 0
6.36 1 0
3.5 0 0
11.35 1 0
5.5 1 0
9.15 1 0
7.96 1 0
5.65 1 0
13.45 0 1
3.65 1 1
6.25 0 1
5.15 0 1
26.29 1 1
2.01 0 1
5 0 1
8.75 0 0
12.5 1 0
4 0 0
4.5 1 0
6.5 0 0
5.5 1 0
6.88 1 0
6.15 0 0
7.78 1 0
12.5 1 0
8.85 1 0
4.35 1 0
11.36 0 0
8.93 1 0
3.5 1 0
26 1 0
8 1 0
16 1 0
5.35 1 0
23.25 1 0
8.63 1 0
18.5 0 0
22.2 1 0
16.26 0 0
19.47 0 0
 F Significance F
8.737818 0.000185

P-value Lower 95%Upper 95%Lower 95.0%Upper 95.0%

2.856E-76 8.026007 9.603631 8.026007 9.603631
0.018208 0.187699 2.011792 0.187699 2.011792
0.000614 -2.626626 -0.719302 -2.626626 -0.719302

81. To put it another

d people is $9.91 (=
han the average
on, Southerners may
4 (= $8.81 - $1.67).
SUMMARY OUTPUT
According to
Regression Statistics increase for a
Multiple R 0.7054489453 additional pu
R Square 0.4976582144 the intercept
Adjusted R Square 0.4655938451 Northeast an
Standard Error 4905.3091524
Observations 51

ANOVA
df SS MS F Significance F
Regression 3 1120372646.348 373457548.78 15.520598888 3.762E-07
Residual 47 1130916720.397 24062057.881
Total 50 2251289366.745

Coefficients Standard Error t Stat P-value Lower 95%Upper 95%

Intercept 28694.918046 3262.521275606 8.7953198222 1.701874E-11 22131.57 35258.26
Spending 2.3404285206 0.359224958009 6.5152169092 4.451322E-08 1.617761 3.063096
D_{2} -2954.1267536 1862.575635705 -1.5860439152 0.1194353054 -6701.146 792.8921
D_{3} -3112.1948063 1819.872527254 -1.7101169228 0.0938389873 -6773.306 548.9165
 According to these findings, the average compensation
increase for a public school teacher is $2.34 for every dollar in
additional public spending. The South is the only area where
the intercept coefficient is statistically significant, however the
Northeast and North Central are quite close.

Lower 95.0%
Upper 95.0%
22131.57 35258.26
1.617761 3.063096
-6701.146 792.8921
-6773.306 548.9165
Column1 Column3
TABLE 9.1
Salary
Connecticut 60,822
Illinois 58,246
Indiana 47,831
Iowa 43,130
Kansas 43,334
Maine 41,596
Massachusetts 58,624
Michigan 54,895
Minnesota 49,634
Missouri 41,839
Nebraska 42,044
New Hampshire 46,527
New Jersey 59,920
New York 58,537
North Dakota 38,822
Ohio 51,937
Pennsylvania 54,970
Rhode Island 55,956
South Dakota 35,378
Vermont 48,370
Wisconsin 47,901
Alabama 43,389
Arkansas 44,245
Delaware
District of 54,680
Columbia 59,000
Florida 45,308
Note: D_{2}
D_{3}
Column4
Average Salary of Public School Teachers by State,2005–2006
Spending
12,436
9,275
8,935
7,807
8,373
11,285
12,596
9,880
9,675
7,840
7,900
10,206
13,781
13,551
7,807
10,034
10,711
11,089
7,911
12,475
9,965
7,706
8,402
12,036
15,508
7,762
1 for states in the Northeast and North Central; 0 otherwise.
1 for states in the South; 0 otherwise.
Source: National
taking the Educational
value of Association,
1 if the observation as reported
belongs in 2007.category and 0 if it does not
to a particular
belong to that category or group. Hereafter, we shall designate all dummy variables by the
letter D. Table9.1 shows the dummy variables thus constructed.
What does the model (9.2.1) tell us? Assuming that the error term satisfies the usual
OLS assumptions, on taking expectation of Eq. (9.2.1) on both sides, we obtain:
Mean salary of public school teachers in the Northeast and North Central:

Mean salary of public school teachers in the South:

guessed that this is equal to β_{1} , you would be absolutely right, for
Mean salary of public school teachers in the West:
Column5 Column6 Column7 Column8 Column9

D_{2} D_{3}
1 0 Georgia
1 0 Kentucky
1 0 Louisiana
1 0 Maryland
1 0 Mississippi
1 0 North Carolina
1 0 Oklahoma
1 0 South Carolina
1 0 Tennessee
1 0 Texas
1 0 Virginia
1 0 West Virginia
1 0 Alaska
1 0 Arizona
1 0 California
1 0 Colorado
1 0 Hawaii
1 0 Idaho
1 0 Montana
1 0 Nevada
1 0 New Mexico
0 1 Oregon
0 1 Utah
0 1 Washington, D.C.
0 1 Wyoming
0 1

E(Y_{i} |D_{2i} = 1, D_{3i} = 0) = β_{1} + β_{2}

E(Y_{i} |D_{2i} = 0, D_{3i} = 1) = β_{1} + β_{3}

wonder how we find out
E(Y_{i} |D_{2i} = 0, D_{3i} = 0) = β_{1}
Column10 Column11 Column12 Column13 Column14 Column15 Column16

Salary Spending
49,905 8,534
43,646 8,300
42,816 8,519
56,927 9,771
40,182 7,215
46,410 7,675
42,379 6,944
44,133 8,377
43,816 6,979
44,897 7,547
44,727 9,275
40,531 9,886
54,658 10,171
45,941 5,585
63,640 8,486
45,833 8,861
51,922 9,879
42,798 7,042
41,225 8,361
45,342 6,755
42,780 8,622
50,911 8,649
40,566 5,347
47,882 7,958
50,692 11,596

the mean salary of teachers in the

Column17 Column18 Column19

D_{2} D_{3}
0 1
0 1
0 1
0 1
0 1
0 1
0 1
0 1
0 1
0 1
0 1
0 1
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0

(9.2.2)

(9.2.3)
West. If you
(9.2.4)
(Continued)