Homework_2 - PAM 305 - Introduction to Multivariate...

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Fall 2006 Homework 2 Due date: September 24th Question 1 The data set WAGE1.dta, contains a sample of N=526 individuals drawn from the population of people in the workforce in 1976 (so wages are in dollars of 1976). Report your answers by means of a STATA log file. Here is the list of commands you will need in order to solve the homework. regress, plot, tab, count, egen, generate, summarize, correlate. Suppose the true model is wage = β o + β 1 educ + u (1) a. Using STATA, obtain the sample regression function. d wage = ˆ β o + ˆ β 1 educ b. Is it true that in order to get an unbiased estimator of the ceteris paribus effect of education on wages, we must assume that E [ u | educ ] = 0? Show that this implies that E [ wage | educ ] = β o + β 1 educ . c. If we also make the homoskedasticity assumption, then V ar [ u | educ ] = σ 2 does not depend on the level of education. Argue that this is the same as assuming V ar [ wage | educ ] = σ 2 . 1
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This note was uploaded on 08/12/2008 for the course PAM 305 taught by Professor Lucarelli during the Fall '06 term at Cornell University (Engineering School).

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Homework_2 - PAM 305 - Introduction to Multivariate...

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