This preview shows pages 1–4. Sign up to view the full content.
Question 1 of 13
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document Estimate these two models:
1) Wage
i
= ß
0
+ ß
1
age
i
+u
i
2) Wage
i
= ß
0
+ ß
1
age
i
+ß
2
education
i
+ u
i
report the estimate for
ß
1
in the first model.
0.458041
Question 2 of 13
report the estimate for
ß
1
in the second model.
0.069477
Question 3 of 13
What is the correlation between age and education? (to calculate the correlation in Eviews hold
ctrl and click on age and education, then right click, open as group, click on view, correlation,
common sample)
0.768287981867992
Question 4 of 13
briefly explain what the problem is in the first model.
Since education is correlated to age and a determinant of wage it is a variable that needs to be
included in the first model. Since, the first model does not contain education it has omitted
variable bias.
Question 5 of 13
what is the R
2
in the first model
0.727833
Question 6 of 13
what is the R
2
in the second model
0.485371
Question 7 of 13
Would it be possible that the R
2
in the second model is less than the R
2
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
This note was uploaded on 01/30/2011 for the course 220 322 taught by Professor Delia during the Spring '10 term at Rutgers.
 Spring '10
 DELIA

Click to edit the document details