Question

The provost at SWC, based on anecdotal evidence, is convinced that the student-faculty ratio (# of students divided by the number of faculty) is an important determinant of student success after graduation. The university president believes the overall prestige of the university is a bigger factor, and other administrators believe it is largely the academic quality of the students admitted that matters most. SWC has purchased some data that shows students’ starting salaries along with various characteristics of the universities the students attended. SWC wants to know if you can determine how the student starting salaries are related to the following variables in the data set: the per semester cost of attendance, the region of the country in which the school is located, the student-faculty ratio, average high school GPA of students admitted, the size of the school’s library, and the school’s national rank. Specifically, the administrators want answers to the following questions: What is the appropriate quantitative technique to determine how the variables are related? Which variables are important determinants of starting salaries? Be sure to explain how you are arriving at this conclusion. What strategy would you recommend for improving the starting salaries of SWC graduates?

Answer 1

What is the appropriate quantitative technique to determine how the variables are related?

The most appropriate quantitative technique will be to fit a regression model to see which of these variables affect the starting salaries significantly and also to what degree.

Which variables are important determinants of starting salaries?

The regression model will show which of these variables actually affect as it will show the t-statistics and p-values which can then be compared with their table values to see if the variable is significant.

Be sure to explain how you are arriving at this conclusion.

If the p-values are more than 0.05, then the variable is insignificant in determining the starting salaries and if its less than 0.05, then the variable is significant.

What strategy would you recommend for improving the starting salaries of SWC graduates?

To improve the starting salaries of the students, we need to check which of the variables are most significant, and then focus on imoprving them. For instance, if "average high school GPA of students admitted" is the factor, then more resources have to be devoted in trying to find out how to increase their GPA and help the students to perform better.