The following equation represents the eﬀects of tax revenue mix on subsequent employment growth for the population of counties in the United States: growth = β0 + β1sharep + β2shareI + β3shares + otherfactors, (1) where growth is the percentage change in employment from 1980 to 1990, sharep is the share of property taxes in total revenue, shareI is the share of income tax revenues, and shares is the share of sales tax revenues. All of these variables are measured in 1980. The omitted share, shareF, includes fees and miscellaneous taxes. By deﬁnition, the four shares add up to one. Other factors would include expenditures on education, infrastructure, and so on (all measures in 1980). Why must we omit one of the tax share variables from the equation?

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Business

Brock Benitez

29 April, 22:08

The following equation represents the eﬀects of tax revenue mix on subsequent employment growth for the population of counties in the United States: growth = β0 + β1sharep + β2shareI + β3shares + otherfactors, (1) where growth is the percentage change in employment from 1980 to 1990, sharep is the share of property taxes in total revenue, shareI is the share of income tax revenues, and shares is the share of sales tax revenues. All of these variables are measured in 1980. The omitted share, shareF, includes fees and miscellaneous taxes. By deﬁnition, the four shares add up to one. Other factors would include expenditures on education, infrastructure, and so on (all measures in 1980). Why must we omit one of the tax share variables from the equation?

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Carmelo Hogan · Answer 1

The stocks complement up to at least one. If one in all the stocks isn't mislaid, then the equation might be grieve from good multiple correlation. The factors might not have a ceteris paribus clarification, because it is not possible to vary one stocks although holding all of the opposite stocks mounted.