EMET2007 Lecture 9 for Wattle

95 or p f22731856 fcalc 005 reject h0 2 nw k 1

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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 = Non-wife 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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