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The linear regression intuition

Published on September 30, 2026   6 min

A selection of talks on Finance, Accounting & Economics

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0:00
Welcome back, everyone. My name is Alessio Volpicella. I'm an associate professor in economics at the University of Pavia, Italy, and today we're going to continue our journey through an introduction to econometrics by introducing the simplest form we may think of in order to model relationships among economic variables. That is the linear regression model.
0:29
We're going to build upon what we saw in the previous talk when we discussed data in econometrics. We introduced some key terms, typology of data, typologies of variables, and argued why their structure is going to affect what we can conclude about the population, which at the end of the day is our goal.
0:55
The roadmap for today's video is to introduce you to the simplest form of model, in order to study the relationship among economic variables that is known as a simple linear regression, and as usual, we are more interested in its economic interpretation than just the math and stat behind it.
1:24
So say we are interested in studying the relationship between Y, which is known in mainstream textbooks as outcome or dependent variable, and X, known as a predictor, regressor, or independent variable. Today, for our running example, let's say Y is the wage of a group of workers and X is their years of education. So our research question will be what is the effect of education on salary? Just to have a rough idea of what we are talking about, let me show you a plot for some workers in Canada.

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The linear regression intuition

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