Suppose that percent share of the vote that the incumbent candidate

| November 24, 2016

Suppose that percent share of the vote that the incumbent candidate gets in anelection (pctshare) is modeled as a linear function of dollars (in hundreds of thousands) spenton advertising by the incumbent (incexp). Using data from U.S. Congressional elections in thelast ten years, the estimated equation is: pctshare = 51.6 – 0.312 incexp (16.5) (1.8) n = 3542 R2= 0.233

a) Interpret the intercept and slope in this equation

.b) What is the predicted incumbent share of the vote if he or she spends one million dollars inan election cycle?

c) What sign would you expect on incexp? Why? Discuss a reason why the coefficient might bebiased. Explain the direction of the bias for whatever direction you decide.

d) Use a t-test to determine whether the coefficient on incexp is significant at the 5% level? Atthe 10% level?

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