Economic statisticians typically deal with two types of data. In ECONOMIC REVIEW Vol. 38, No. 2, I looked at an example of time series data where the data consisted of observations of variables at different points in time. The example considered was one in which we observed the quantity and price of potatoes in the USA where the data were reported on an annual basis. The other type of data we frequently encounter consists of a cross section. This means that the data consist of observations of different individual units observed at a particular point in time. For example, we might consider individual consumers or households, different firms or countries or, for the purposes of this article, different regions within the same country.
The data which we will consider in this article consist of observations of house prices and household income for different regions within the UK. This will allow us to demonstrate the existence of a strong positive relationship between house prices and income. We will also explore the effects of the London housing market on this relationship. This is because London is a clear outlier in our sample and it is possible that its inclusion might bias our results. Finally, we will present some conclusions and some further questions you might like to consider regarding this relationship.
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