Wooldridge IE AISE SSM ch05 - This edition is intended for...

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Unformatted text preview: This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. 24 CHAPTER 5 SOLUTIONS TO PROBLEMS 5.2 The variable cigs has nothing close to a normal distribution in the population. Most people do not smoke, so cigs = 0 for over half of the population. A normally distributed random variable takes on no particular value with positive probability. Further, the distribution of cigs is skewed, whereas a normal random variable must be symmetric about its mean. 5.4 Write y = + 1 x 1 + u , and take the expected value: E( y ) = + 1 E( x 1 ) + E( u ), or y = + 1 x since E( u ) = 0, where y = E( y ) and x = E( x 1 ). We can rewrite this as = y- 1 x . Now, = y 1 1 x . Taking the plim of this we have plim( ) = plim( y 1 1 x ) = plim( y ) plim( 1 ) plim( 1 x ) = y...
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Wooldridge IE AISE SSM ch05 - This edition is intended for...

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