EXAMPLE 10.2 Correlation between Log Income and Education Level

CASE 10.1 For Case 10.1, the correlation between LOGINC and EDUC is . Because the squared correlation , the change in log income along the regression line as years of education increases explains only 5.7% of the variation. The remaining 94.3% is due to other differences among these entrepreneurs. The entrepreneurs in this sample live in different parts of the United States; some are single and others are married; and some may have had a difficult upbringing. All these factors could be associated with log income and thus add to the variability if not included in the model.