Econ 4400 – Elementary Econometrics

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Econ 4400 – Elementary Econometrics

HOMEWORK 3Econ 4400, Elementary EconometricsDirections: Please follow the instructions closely. Questions 1-10 are worth 9 pointseach. Question 10 is worth 10 points.Due: All problem sets have to be turned in at the beginning of the class.Due Dates:Section 15138: September 29Section 15139: September 30Table 1 shows the results from estimating the number of drinks per week as a functionof receiving doctor’s advice to drink less, education, divorced, and unemployment. Dr.’sadvice, divorced, and unemployed are all dummy variables. Regression coefficients aredisplayed with standard errors in parentheses.1. Write out the estimated equation. (This means use the numbers in the tableinstead of ?s.)2. Use the equation in number 1 to estimate the number of drinks per week for aperson with 12 years of education that did not receive doctor’s advice, is divorced,and has a job.3. Interpret the coefficient on education.4. Interpret the coefficient on unemployed.5. Why might the coefficient on advice be biased?6. I wanted to find the effect of not getting doctor’s advice on drinks, so I added adummy variable for no advice. However, STATA did not produce results. Why?7. List and briefly describe the seven assumptions of the classical linear model.8. Conduct a t-test on the null hypothesis that education has no effect on drinking.(Any time you are asked to conduct a test you must include: H0 , HA , calculationof appropriate test statistic, mention of degrees of freedom, mention of significancelevel, critical value of test statistic, and your decision. )9. Solve for the missing R2 and RSS in table 1.¯ 2 compare to the R2 that you found in the previous question?10. How does the R¯ 2 to answer this question. )(You do not have to solve for the RTable 1: Regression results on Drinks per Week(1)drinksAdvice8.620(4.325)Education0.0934(0.644)Divorced7.260(5.600)Unemployed32.74(14.68)Constant8.598(8.774)1004697.6???44277.4???NESSRSSTSSR2Standard errors in parentheses