Sahana Rajanahally

Assignment 7

PART I

1. A) For the population of cars with a 3-liter engine that run at 4000 revolutions per minute
with 4 cylinders and automatic transmission, the estimated average horsepower is
99.67642, and our 90% confidence interval for this estimate is (93.4153, 106.3517).

B) For 5-liter, 8-cylinder engines, we can prove at the 5% significance level (95% CI) that on
average, a manual transmission generates more horsepower at 4000 revolutions per minute
than that of an automatic transmission, given that the coefficient in the output (.699) is positive.

PART II
1. Based on the output from the new fixed effects model below, our initial recommendation that
Kleitzl Hills should hire 10 additional nurses has changed. Because we are now looking at nsr
within a specific hospital (as opposed across several hospitals), we are only 1.3% confident that
hiring 10 additional nurses would result in an increased bonus that exceeds the hiring costs of
$600,000. In other words, we are 98.7% confident that an increase in bonus will be less than
$600,000, which means that Kleitzl Hills should not hire additional nurses.
2. A) Within hospitals: Based on the fixed effects regression above, we can see that nsr and
mortality are positively correlated given that the coefficient of nsr is positive. This essentially
means that as the nurse staffing ratio increases, the rate of mortality also increases. However,
we can also see that the p-value is high, therefore this is not a statistically significant claim.

B) Between/across hospitals: Based on the regression below (as well as the regressions in our
previous homework assignments), we can see that the nsr coefficient is negative, which means it
has an inverse relationship with mortality. However, because our fixed effects regression
displayed the opposite, we can infer that our initial (non-fixed effect) model had some negative
OVB (OVB = B1 – B2 = -.629 - .14 <0 = Negative). This means that our original model overstated a
negative effect of nsr on mortality.