qe problem set 2.pdf - Problem Set 2 1 1.a)1 = 365 ∗ 100 = 0.274 0 = 200 The 1 is the amount that increase when there is one unit increase in wage

# qe problem set 2.pdf - Problem Set 2 1 1.a)1 = 365 ∗ 100...

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Problem Set 2 1.a) 𝛽𝛽 1 = 1 365 100 = 0.274, 𝛽𝛽 0 = 2 00 The 𝛽𝛽 1 is the amount that increase when there is one unit increase in wage. Originally, the time of education is measured in years and now it is measured in days so the unit changes from a year to a day. Also the unit of wage changes from pound to cent. So one unit change in education will cause 1/365*100 increase in wage. In terms of 𝛽𝛽 0 , it means when you never received any education, you will have 2 pounds wage( may be grant given by government) so now you should have 200 cents. b) The second economists will not have a higher 𝑅𝑅 2 because it represents the proportion of the variance for a dependent variable that is explained by an independent variable in the regression model. There are no more other independent variables that can explain effects to wages to be added in so the changes of measuring units will not affect 𝑅𝑅 2 with the same data. 2.a) average participation rate and the average match rate are 87.4 and 0.731.

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Unformatted text preview: b)sample size is 1534 and 2 is 0.0747. c)When the matching rate is zero, which means 1 dollar contribution by a worker participation in the plan is matched by 0 contribution by the firm, the participation rate is 83.07%. When there is a one unit increase in matching rate, the participation rate in crease by 5.86%, keeping other variables constant. The error term u contains age and marriage status( whether he/she is sole or not). d) mrate= 3.5,prate=83.07%+3.5%*5.86%=83.27%. This is not a reasonable prediction because 3.5mrate means that 1 dollar contributed by worker is matched by 350 cents contribution by the firm. In this case, the input of worker is way smaller than return and is largely beneficial which could attract everyone with possibly 100 participation rate instead of 83.27. e)7.47% variation of prate is explained by mrate. This is very little. f)The regression using lnmrate has higher 2 g)...
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