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This question was created from 122B_mid_w18_sol.pdf https://www.coursehero.com/file/53672763/122B-mid-w18-solpdf/

1. (23 points) Consider the following binary variable version of the ﬁxed eﬁects model. Consider
the example of Fatality Rate (Ygt) and Beer Taxes (Xa) with a panel data of 48 states and
7 years. We use binary variables to denote the individual states. The regressor DTXz' is a
binary variable for Texas that equals 1 when 2'. = TX and 0 otherwise. The binary variable
for California Dam is omitted. Ya = 160 + 15an ‘i‘ 182DTX3‘ + ﬁSDMAi + + 548DNH + “a;
for 2' = 1,2,...,48 and t = 1982,1983,...,1988. (You do not need to explain your reasoning for ( a)-( f ) ) (a) The slope of TX in 1983 is
(b) The intercept of TX in 1983 is
(c) The slope of MA in 1983 is
(d) The intercept of MA in 1983 is
(e) The slope of CA in 1983 is
(f) The intercept of CA in 1983 is (g) (5 points) Why don’t we include Dam in the above regression?

Using this regression equation, we would get... View the full answer

And-al slope of TX = BI
And- 6.) Intercept of TX = Bot BZ
If we write Dixi= 1, &amp; there is no time dummy,
we have
Yit = ( Bot B2) + BIXit
- : The intercept should be Bot B2.
Similar reasoning...

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