There Has Been Much Debate About the Impact of Minimum $\widehat { U r _ { i } ^ { 95 } } = 3.19 + 0.27 \times U r _ { i } ^ { 85 } , R ^ { 2 } = 0.21 , S E R = 1.031$

question 41

Essay

There has been much debate about the impact of minimum wages on employment and
unemployment.While most of the focus has been on the employment-to-population ratio
of teenagers, you decide to check if aggregate state unemployment rates have been
affected.Your idea is to see if state unemployment rates for the 48 contiguous U.S.states
in 1985 can predict the unemployment rate for the same states in 1995, and if this
prediction can be improved upon by entering a binary variable for "high impact"
minimum wage states.One labor economist labeled states as high impact if a large
fraction of teenagers was affected by the 1990 and 1991 federal minimum wage
increases.Your first regression results in the following output: $\widehat { U r _ { i } ^ { 95 } } = 3.19 + 0.27 \times U r _ { i } ^ { 85 } , R ^ { 2 } = 0.21 , S E R = 1.031$
$\quad$$\quad$$\quad$$(0.56) \quad(0.07)$ (a) Sketch the regression line and add a $45 ^ { \circ }$ line to the graph. Interpret the regression results. What would the interpretation be if the fitted line coincided with the $45 ^ { \circ }$ line?

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