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Unformatted text preview: Northwestern University Department of Economics ECON 281 Introduction to Applied Econometrics Professor: Steffen Habermalz Midterm Examination October 19 th 2006 INSTRUCTIONS : Answer all questions. Make sure you show ALL your work. Dont use a pencil. Exams written with a pencil are not eligible for re-grading. 1. (8 pts.) Assume you know that in a particular industry the mean wage equals $12 per hour. You also know that 16% of the workforce in this sector is unionized and that the mean wage for non-unionized labor equals $10 per hour. Find the mean hourly wage of union members in this industry. 2. Answer the following questions. a) (4 pts.) Describe the importance of the Central Limit Theorem. b) (4 pts.) Assume you draw an i.i.d sample (N=256) from X~(3,16). What is the probability that the sample mean is smaller than 3.3? c) (4 pts.) How big of a sample would you need that the sample mean is within 1% of its true value ( % 1 ) with a probability of at least 99%? 3. You have estimated the following regression model i i o i u X Y + + = 1 by OLS and STATA returned the following results i i X Y - = 48 . 200 a) (2 pts.) Assume the sample mean of the dependent variable is = Y 104. What is 104....
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