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Unformatted text preview: ule will be reject H0 if Fcalc > F2273,1856,0.95 , or
P (F2273,1856 > Fcalc ) < 0.05, reject H0
2
nw k 1 = 1856, sw = 0.52889, nm
2 = 0.57251
sm k 1 = 2273 and The test statistic is then (always put the biggest on top) P (F2273,1856 2
sm
0.32777
=
= 1.1718 s F2273,1856
2
sw
0.27972
> 1.1718) = 0.00018 So in this case we reject the null and conclude that the Chow test was
not appropriate for the test of the same regression coe¢ cients for
men and women
Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 38 / 53 What about a categorical dependent variable, y ?
For example, what if y = 0 or y = 1 such that we have a Binary
dependent variable? Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 39 / 53 A Binary dependent variable: the linear probability model
Linear regression when the dependent variable is binary If the dependent variable only takes on the values 1 and 0 Therefore we should have 0 < E (y jx ) < 1
Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 40 / 53 Linear probability model (LPM) In the linear probability model, the coe¢ cients describe the e¤ect of the
explanatory variables on the probability that y = 1 Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 41 / 53 Example: Labour force participation of married women
The dependent variable is:
inlf = 1 if in labour force, = 0 otherwise The explanatory variables include:
nwifeinc = Nonwife income (in thousand dollars per year)
kidslt 6 = The number of kids under six years
kidsge 6 = The number of kids over six years Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 42 / 53 The estimated linear probability model: kidsge 6 does not look signi…cant (but see below)
If the number of kids under six years increases by one, the probability
that the woman works falls by 26.2% Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 43 / 53 Graph for nwifeinc = 50, exper = 5, age = 30, kindslt 6 = 1, kidsge 6 = 0 Lecture 9 (qualitative variables) EMET2007/6007 8 st May 2013 44 / 53 Example: Female labour particip...
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