Solution to class problem set 6

# Solution to class problem set 6 - Class Assignment 6 Use...

This preview shows pages 1–2. Sign up to view the full content.

Class Assignment 6: Use Data 7-6 to test for structural break (Chow s Test) for the following model: Variable D90=0 for 1980 census and D90=1 for 1990 census. (1) Povrte= β 0 + β 1 urb+ β 2 famsize+ β 3 unemp+ β 4 highschl+ β 5 college+ β 6 medinc+u Method 1- H 0: There no structural break (model differences) H 1 : Null is not true Regress (1) using the entire sample to obtain SSR re =517.2600 in model 1. Regress (1) using obs. 1-58 (1980 census) to obtain SSR 1 =133.95, model 1. Regress (1) using obs. 59-116 (1990 census) to obtain SSR 2 =146.09. SSR ur =113.95+146.09=280.04 Test statistics ࠵? = 517.26−280.04 7 280.04 102 = 12.34 > ࠵? 7,102 (0.01) = 2.82 Hence, reject the null. There is structural break Model 1: OLS, using observations 1-116, Dependent variable: povrate Coefficient Std. Error t-ratio p-value const 46.7035 6.08573 7.6743 <0.0001 *** urb 0.00144673 0.00876398 0.1651 0.8692 . . . . . . . . . Sum squared resid 517.2600 S.E. of regression 2.178418 Model 2: OLS, using observations 1-58, Dependent variable: povrate Coefficient Std. Error t-ratio p-value const 27.8515 8.67518 3.2105 0.0023 *** urb 0.0238359 0.0108756 2.1917 0.0330 ** . . . . . . . . . Sum squared resid 133.9526 S.E. of regression 1.620655 Model 3: OLS, using observations 59-116 (n = 58), Dependent variable: povrate

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern