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Homework_2

Homework_2 - PAM 305 Introduction to Multivariate Analysis...

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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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Homework_2 - PAM 305 Introduction to Multivariate Analysis...

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