My lecturer's regression:
Variables: *lprice*, the log of house prices *y81*, which is a dummy for the year 1981 against 1978 *ldist*, log of distance from incinerator to houses
These are comments made by my lecturer to help give context:
- From the lecture we know that in 1978 people did not know about the incinerator site.
- By 1981 people did know about the site.
- If building the incinerator reduces the value of houses closer to the site, the coefficient on y81*ln(dist), delta_1, will be positive.
- If beta_1 is positive it indicates that the incinerator is being located in an area where the houses are of lower value.
- (If politicians/planners assume that poorer people have less lobbying power, this would be evidence of strategic decision-making on their part.)
After regression was done my lecturers comment was this:
- The coefficient on y81ldist is positive, but small and not significantly different from zero at the 10% level (or the 5% level or the 1% level).
- In contrast the coefficient on ldist is positive and significant at the 0.1% level according to a two-tailed test.
- Based on this preliminary analysis, I conclude that the incinerator has no effect on house values.
Now i changed lprice to price to see if it made a difference. Here is the regression I got:
Here the coefficient of y81ldist is quite large, and significant at 6.7% level, compared to a 55% in the first regression.
Im curious as to why my lecturer concluded that building the incinerator had no effect on prices? Am I overlooking something? From my regression, it shows that building the incinerator reduced prices of houses that are nearer to it by an average of ~15,400 dollars. (Also, does the 19302 coefficient on ldist mean that before the incinerator was built, prices of houses that were further away from the proposed site of building were already 19302 dollars more expensive that the ones closer?)
Are my interpretations right? Any insight would be appreciated.