An important question in economics is how things happen and what the determining factors are. Economic theory provides theoretical foundations that explain what factors affect a phenomenon and in which way. For example, which factors affect income and what are the anticipated outcomes. Factors such as hours of work, education, experience, complexity of a job, unpleasantness of the job, and demand for a particular type of a job in a region are identified through economic theory or common sense as factors affecting income.
Regression analysis provides a method to develop a model of income as a function of these factors. Regression methodology also provides procedures to test the validity of the overall model. In addition, it can test ...
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