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ps2w2006

# ps2w2006 - Department of Economics W inter 2006 Problem...

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1 Department of Economics Economics 120B Winter 2006 Prof. Berman Problem Set #2 Due Tuesday, February 7 Please hand in answers on this sheet and staple the output (.log) file to it. 1. Confidence Intervals: The file cps84.dta contains information about wages and education for 13,743 observations from the Current Population Survey of October 1984. It is available at http://econ.ucsd.edu/~elib/120b/ In those data a linear regression describes the relationship between log wages (y) and years of education (x) where 0 1 the intercept of the regression line is \$ and the slope is \$ . 0 1 0 1 y = \$ + \$ x + , , with \$ =0.985 , \$ = 0.070 , Cov(x, , )=0. Treat these data as a population. Generate a sample of 40 observations from the population as in the Stata log file attached below. We are 0 1 interested in the sampling variance of the least squares estimates of \$ and \$ . (In Stata, generating a random sample using the "bsample" command requires setting a "seed" value. Choose the seed to be some arbitrary large positive, odd number. Don * t use the same number as any of your classmates. Identical seed values will be interpreted in the worst possible way and marks will be deducted.) 0 1 a) Calculate OLS estimates of \$ and \$ using your 40 observation sample. Report your sample estimates here. b) Now pretend that you don't know anything about the population except for the information in the sample. Test the 1 null hypothesis that \$ = 0.070 using the data you have in your40 observation sample, using a two-tailed test and

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ps2w2006 - Department of Economics W inter 2006 Problem...

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