PS5F10answers - Problem Set 5 - Solutions Econ 122 B...

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Problem Set 5 - Solutions Econ 122 B – Applied Econometrics The data set that we use in this problem is JEC which contains weekly observations on prices and other factors from 1880-1886, for a total of n = 326 weeks. These data were provided by Professor Rob Porter of Northwestern University and were used in his paper “A Study of Cartel Stability: The Joint Executive Committee, 1880-1886” The Bell Journal of Economics, Vol. 14, No. 2, Autumn 1983, 301-314. Using variations in supply associated with the cartel collapses (i.e., temporary collapse of the collusive price-setting agreement due to cheating by members of the cartel from time to time), we want to examine the elasticity of demand for rail transport of grain . a) Estimate the following regression using EViews: i j i j j i i i u Seas Ice ice Quantity + + + + = = + 12 1 , 2 2 1 0 ) ln(Pr ) ln( β ββ Based on this regression output, interpret the coefficient of Price and give a 95% confidence interval for it. So what do you conclude about the elasticity of demand for rail transport of grain based on this regression output? (i.e. summarize your result) Answer : The EViews regression output is as follows: Dependent Variable: LOG(QUANTITY) Method: Least Squares Date: 11/02/10 Time: 14:31 Sample: 1 328 Included observations: 328 White heteroskedasticity-consistent standard errors & covariance Variable Coefficient Std. Error t-Statistic Prob. LOG(PRICE) -0.638885 0.073280 -8.718360 0.0000 ICE 0.447754 0.134929 3.318446 0.0010 SEAS1 -0.132822 0.095794 -1.386531 0.1666 SEAS2 0.066888 0.090707 0.737413 0.4614 SEAS3 0.111436 0.097015 1.148654 0.2516 SEAS4 0.155422 0.132498 1.173014 0.2417 SEAS5 0.109658 0.127657 0.859007 0.3910 SEAS6 0.046833 0.176642 0.265126 0.7911 SEAS7 0.122552 0.199866 0.613173 0.5402 SEAS8 -0.235008 0.174990 -1.342982 0.1803 SEAS9 0.003561 0.172375 0.020656 0.9835 SEAS10
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This note was uploaded on 11/28/2010 for the course ECON Economics taught by Professor Davidbrownstone during the Spring '10 term at UC Irvine.

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PS5F10answers - Problem Set 5 - Solutions Econ 122 B...

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