Instructor : H.H. Kim
Econometrics
1
Practice Questions IV
1) The survey conducted each March is more detailed than in other months and asks questions about
earnings during the previous year. The file
CPS04
contains the data for 2004 (from the March 2005
survey). These data are for fulltime workers, defined as workers employed more than 35 hours per week
for at least 48 weeks in the previous year. Data are provided for workers whose highest educational
achievement is (1) a high school diploma, and (2) a bachelor’s degree.
Series in Data Set:

FEMALE: 1 if female; 0 if male

YEAR: Year

AHE : Average Hourly Earnings

BACHELOR: 1 if worker has a bachelor’s degree; 0 if worker has a high school degree
Two regression is done here. First regression (a) is about AHE on Age. And regression (b) is for AHE on
Age, Female and Bachelor.
Regressor
Model
a
b
Age
0.60
(0.04)
0.59
(0.04)
Female
–3.66
(0.21)
Bachelor
8.08
(0.21)
Intercept
1.08
(1.17)
–0.63
(1.08)
SER
9.99
9.07
R
2
0.029
0.200
2
R
0.029
0.199
N
4000
4000
a.
Are the results from the regression (b) substantively different from the result in (a) regarding the
effects of Age and AHE? Does the regression in (a) seem to suffer from the omitted variable bias?
b.
Bob is a 26year old male worker with a high school diploma. Predict Bob’s earnings using the
estimated regression in (b).
c.
Alexis is a 30year old female worker with a college degree. Predict Alexis’s earnings using the
estimated regression in (b).
d.
Test the null hypothesis that both Female and Bachelor can be deleted from the regression.
e.
Test the null hypothesis that Female can be deleted from the regression.
f.
Test the null hypothesis that Bachelor can be deleted from the regression.
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