# LIR832-Fall-2004-final-exam answer key-1 - LIR 832 Final...

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LIR 832: Final Examination: Fall, 2004 This examination consists of two parts. The first, worth 60 points consists of three problems each worth 20 points. You are to answer three of your choice. If you answer four, I will base your grade on the three with the lowest scores. The second part of the exam, worth 55 points, is an analytic essay. Instructions for the essay are found in the second section of this examination. The examination is scheduled to last two and one half hours Part A: 1. We are estimating several models of the impact of salary on absence behavior. Being as specific as possible, explain the effect of a one unit change in the explanatory variable on absence in each of these specifications. The variables in the model are: Days Absent Number of days absent in the last year Salary Annual salary in thousands of Euros (you see, even our exams are global in perspective!) Ln Natural Log A. Days Absent = 10 - .02*salary A ONE THOUSAND EURO INCREASE IN SALARY IS ESTIMATED TO REDUCE THE NUMBER OF DAYS ABSENT BY 0.02. B. Ln(Days Absent) = 3 - .004*salary A ONE THOUSAND EURO INCREASE IN SALARY IS ESTIMATED TO REDUCE THE NUMBER OF DAYS ABSENT BY 0.4%. C. Ln(Days Absent) = 3 - .1*ln(salary) A 1% INCREASE IN SALARY IS ESTIMATED TO REDUCE THE NUMBER OF DAYS ABSENT BY 0.1%. 0.1 IS THE ELASTICITY OF “DAYS ABSENT” WITH RESPECT TO SALARY. D. Days Absent = 10 - .03*salary + .0004*salary 2

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THE EFFECT OF SALARY ON “DAYS ABSENT” CAN BE EXPRESSED AS: -0.03 + 2*0.0004*SALARY OR –0.03 + 0.0008*SALARY 2. In 1998 W Andres and C. Christenson published a pioneering study of underground coal mining safety in which a major purpose was to determine the impact of the 1952 Mine Safety Act on mine fatalities. One of the goals of the legislation was to cut down on the high accident rate in small mines. The authors hypothesized that mine fatalities were a function of the level of mine technology, average mine size and mine safety regulation. The authors also suggest that (1) increased use of technology such as long wall mining devices will reduce fatalities, (2) larger mines are safer, (3) fatalities will increase with the amount of coal mined and (4) the effect of war periods are ambiguous as there is a drive for production even at the expense of safety but manpower shortages may encourage greater attention to safety. Consider the following estimated equation (standard errors in parentheses). F t = 3.49 + 0.023*T t - 0.017*S t + 0.005*O t - 0.028*R t - 0.77*W t (0.005) (0.006) (0.012) (0.163) (0.107) (0.012) n = 54 r 2 = .665 Standard Error in ( ) Where F t fatal injuries per million man hours worked in year t T t percent of year t’s output that was mined by long wall mining devices S t percent of industry output from mines with at least 100 employees in year t O t tons of coal produced per man-hour in year t R t a regulation dummy equal to 1 for 1953 to W t a dummy indicating a year in which the United States was involved in a major war or armed conflict r 2 665 = ..
A. Is this estimate consistent with the authors’ hypotheses that the Mine Safety Act of 1952 reduced mine fatalities? Explain your answer. Use 10%, 5% and 1% tests for the hypotheses.

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## This note was uploaded on 07/25/2008 for the course LIR 832 taught by Professor Belman during the Spring '07 term at Michigan State University.

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LIR832-Fall-2004-final-exam answer key-1 - LIR 832 Final...

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