an introduction to regression analysis.pdf

The Inaugural Coase Lecture An Introduction to Regression Analysis * Alan O. Sykes Regression analysis is a statistical tool for the investigation of re- lationships between variables. Usually, the investigator seeks to ascertain the causal eect of one variable upon another—the eect of a price increase upon demand, for example, or the eect of changes in the money supply upon the ination rate. To explore such issues, the investigator assembles data on the underlying variables of interest and employs regression to estimate the quantitative eect of the causal variables upon the variable that they inuence. The investigator also typically assesses the “statistical signicance” of the estimated relationships, that is, the degree of condence that the true relationship is close to the estimated relationship. Regression techniques have long been central to the eld of eco- nomic statistics (“econometrics”). Increasingly, they have become important to lawyers and legal policy makers as well. Regression has been oered as evidence of liability under Title VII of the Civil Rights Act of , as evidence of racial bias in death penalty litiga- tion, as evidence of damages in contract actions, as evidence of violations under the Voting Rights Act, and as evidence of damages in antitrust litigation, among other things. In this lecture, I will provide an overview of the most basic tech- niques of regression analysis—how they work, what they assume, Professor of Law, University of Chicago, The Law School. I thank Donna Cote for helpful research assistance. See, e.g, Bazemore v. Friday, U.S. , (). See, e.g., McClesky v. Kemp, U.S. (). See, e.g., Cotton Brothers Bak