321_F11_slides4

# 321_F11_slides4 - Review of Econ 221 Part III Econ 321...

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Click to edit Master subtitle style Econ 321-Stéphanie Review of Econ 221 Part III Econ 321 Introduction to Econometrics 11

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Econ 321-Stéphanie Additional Tools and Issues in Statistical Analysis Conditional distribution and conditional mean Covariance/Correlation Simple Regression Analysis Causality 22
Econ 321-Stéphanie Conditional Distribution Conditional Mean 33

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Econ 321-Stéphanie Further Analysis: Moving to Multidimensional analysis Layoff from a corporation in which 35% of the employees are age 40 or older. Of the 100 employees who are laid off, 45% are age 40 or older. a hypothesis test indicates that this is unlikely to have occurred by chance. A full analysis has to examine whether the pattern of layoffs can be attributed to specific non-discriminatory sources. Did we close a plant which had a larger proportion of older workers?
Econ 321-Stéphanie Starting with 2 Variables Typical issues What is the relationship between annual earnings and tenure? Do taller people earn more?

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Econ 321-Stéphanie Covariance We are looking for a way of expressing and measuring the strength of association of two variables How closely do they move together? Is variable A a good predictor of variable B?
Econ 321-Stéphanie 77 Covariance

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Econ 321-Stéphanie Correlation corr( X , Z ) = –1 ≤ corr( X , Z ) ≤ 1 corr( X , Z ) = 1 mean perfect positive linear association corr( X , Z ) = –1 means perfect negative linear association corr( X , Z ) = 0 means no linear association
Econ 321-Stéphanie Plot of Age Against Income

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Econ 321-Stéphanie
Econ 321-Stéphanie

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Econ 321-Stéphanie
Econ 321-Stéphanie Regression Analysis What explains individual variations in monthly earnings? Example with data on monthly earnings and IQ scores, education, experience, …

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Econ 321-Stéphanie wage 769 808 825 650 562 1400 600 1081 1154 1000 930 921 900 1318 1792 IQ 93 119 108 96 74 116 91 114 111 95 132 102 125 119 118 married 1 1 1 1 1 1 0 1 1 1 1 1 0 1 1 educ 12 18 14 12 11 16 10 18 15 12 18 14 15 16 16 exper 11 11 11 13 14 14 13 8 13 16 8 9 4 7 9
Econ 321-Stéphanie Descriptive Statistics Variable Obs Mean Std. Dev. Min Max wage 935 957.9455 404.3608 1153078 IQ 935 101.2824 15.05264 50 145

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## This note was uploaded on 10/29/2011 for the course ECON 321 taught by Professor Louis during the Fall '09 term at Waterloo.

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321_F11_slides4 - Review of Econ 221 Part III Econ 321...

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