psviiii140a

psviiii140a - University of California Department of...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
University of California D. Steigerwald Department of Economics Economics 140A Problem Set IX 1. In a 2000 study of a sample of Californians, each person’s consumption C t is regressed on an intercept, their wage and salary income W t and their asset income A t . The OLS regression estimates are P t c = ) . ( t ) . ( t ) ( a . w . 3 3 5 2 50 3 5 200 + + R 2 = .95, t = 1,2,. ..,103. Residual Sum of Squares : RSS 1 = 30 . Note: The numbers in parentheses are estimated standard errors. a) Given the results above, do you think multicollinearity is present? Please explain your answer. b) If a new aggregate income regressor Y t = W t + A t replaces the individual income regressors, then the OLS regression estimates are ) (. t ) ( P t y . c 25 48 75 210 + = R 2 = .949, t=1,2,. ..103. Residual Sum of Squares : RSS 2 = 35 . Briefly explain how and why things may have changed compared to the previous results. c) How would you test the null hypothesis that the coefficients of W t and A t in the first regression are equal? Suppose you reject the null hypothesis, how would this affect your answers to parts a) and b) above? Can you think of an alternative procedure to the one presented in part b)? Explain. d) How would these tests you have constructed be affected if the errors are not normally distributed?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2. Suppose output for the economy is given by the production relation (1) ln Q t = β 0 + 1 ln L t + 2 ln K t + U
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

psviiii140a - University of California Department of...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online