Section_5_Spring2008 - : 02) Educ : 14 : 145 : 12 (0 : 03)...

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Practice Problem: F-test and OVB Econ 142 Spring 2008 Raymundo M. Campos-Vazquez February 20, 2008 Contents 1 Problem 1: F-tests 1 1 Problem 1: F-tests You want to estimate the causal e/ect of smoking on wages. You estimate the following regression: ln w = & 0 + 1 Smoke + 2 Age + 3 Education + u Smoke is a dummy variable for smoking, Age is the age of indvidual, Education is the years more regression models. One including a dummy variable for female, and the last model includes a dummy variable for female, age squared and an interaction term between age and education. The following table includes the parameters from the three regressions (Note: Numbers Column (2) includes female and (3) include female and other terms. Standard errors are shown in parentheses: 1
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(1) (2) (3) Smoke -0.10 -0.12 -0.11 (0 : 03) (0 : 01) (0 : 01) Age 0 : 05 0 : 05 0 : 10 (0 : 01) (0 : 01) (0
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Unformatted text preview: : 02) Educ : 14 : 145 : 12 (0 : 03) (0 : 03) (0 : 03) Female & : 30 & : 32 (0 : 10) (0 : 10) Age 2 & : 05 (0 : 03) Age Educ : 10 (0 : 04) R 2 : 50 : 53 : 60 R 2 : 48 : 51 : 57 n 100 100 100 1. Using Column (1), what is the e/ect of smoking on wages? 2. Under which conditions would the coe cient on smoking give you a causal interpreta-tion of smoking on wages? 3. Test the null hypothesis that the population parameter of smoking is equal to -0.15 agianst the alternative the paramter is di/erent from -0.15. 4. Using Column (1), test the signi&cance of the regression (i.e. test whether all parame-ters but the constant are equal to zero). 5. Comparing Column (1) and (2) you observe that the coe cient on smoking is more negative in column (2) than in column (1). Why is this the case? 6. Test whether you should use Model (3) instead of Model 1 at the 5% signi&cance level. 2...
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Section_5_Spring2008 - : 02) Educ : 14 : 145 : 12 (0 : 03)...

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