Exercise 4 Key - Problem 4 p54 C7 p57

ECO 5350 T.
Fomby
Intro. Econometrics Fall 2016
EXERCISE 4
KEY
Purpose: To learn more about bivariate regression. This exercise is due on Tuesday,
September 20.
Work problems 4, 5, and 6 on page 54 of your textbook and computer exercises C5, C6, and C7
on page 57. I will choose 3 2 of these problems/exercises for grading so you need to answer
each of the problems and exercises on a separate page or pages so that I can easily grade them.
Be sure and put your name on each of the problems/exercises.
I chose problems 4 and C7.
Problem 4:
(i) What is the predicted birthweight when cigs = 0? Answer: 119.77. What about when cigs =
� = 119.77 − 0.514(20) = 109.49 . Comment on the difference.
20? Answer: 𝑏𝑏𝑏𝑏𝑏𝑏ℎ𝑡𝑡
Answer: Obviously, mothers who smoke cigarettes during pregnancy have, on average, lower
birthweight children.
(ii) Does this simple regression necessarily capture a causal relationship between the child’s birth
weight and the mother’s smoking habits? Explain. Answer: In this case, smoking precedes the
birth of the child and therefore the incidence of smoking can be considered to be causal.
However, there are probably many other factors that affect the birthweight of child such as
income of the mother, overall health of the mother, and environmental conditions (smog,
pollution, etc.). Nevertheless, even with these other factors considered in a multiple regression
of birthweight on these factors, we are likely to see that smoking would still maintain its
significant role in affecting birthweight.
(iii) To predict a birth weight of 125 ounces, what would cigs have to be? Answer:
Bw = 119.77 – 0.514cigs. Therefore, 125 = 119.77 – 0.514(cigs*) which results in
cigs* = -10.175. This is clearly impossible. After all, the above regression equation
implies that the “best” average birthrate for non-smokers is 119.77 ounces.
(iv) The proportion of women in the sample who do not smoke while pregnant is about 0.85.
Does this help reconcile your finding from part (iii)? Answer: We know that it would be nicer,
in terms of sample design, to have more smokers in the sample because this would add to the
variation in the explanatory variable (cigs) and we might get a more accurate estimate of the
intercept which gives us the average birthweight of children of non-smoking mothers. It is
possible that the intercept estimate might take on a more accurate estimate in this case and
indicate the greater likelihood of having larger babies.
Problem C7:
(i) The average gift is about 7.44 Dutch guilders. Out of 4,268 respondents, 2,561 did not give a
gift, or about 60 percent.
(ii) The average mailings per year is about 2.05. The minimum value is .25 (which presumably
means that someone has been on the mailing list for at least four years), and the maximum value
is 3.5.
(iii) The estimated equation is
� = 2.01 + 2.65 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑎𝑎𝑎𝑎

𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔
n = 4,268, 𝑅𝑅 2 = 0.0138
(iv) The slope coefficient from part (iii) means that each mailing per year is associated with –
perhaps even “causes” – an estimated 2.65 additional guilders, on average. Therefore, if each
mailing costs one guilder, the expected profit from each mailing is estimated to be 1.65 guilders.
This is only the average, however. Some mailings generate no contributions, or a contribution
less than the mailing cost; other mailings generated much more than the mailing cost.
(v) Because the smallest mailsyear in the sample is .25, the smallest predicted value of gifts is
2.01 + 2.65(.25) ≈ 2.67. Even if we look at the overall population, where some people have
received no mailings, the smallest predicted value is about two. So, with this estimated equation,
we never predict zero charitable gifts.
The STATA program that generates the above answers is given by:
summarize gift
summarize gift if gift == 0
summarize mailsyear
regress gift mailsyear
predict yhat
summarize yhat
Here is the output from that program:

___ ____ ____ ____ ____ (R)
/__ / ____/ / ____/
___/ / /___/ / /___/ 14.0 Copyright 1985-2015 StataCorp LP
Statistics/Data Analysis StataCorp
4905 Lakeway Drive
College Station, Texas 77845 USA
800-STATA-PC http://www.stata.com
979-696-4600 s tata@stata.com
979-696-4601 (fax)
Single-user Stata perpetual license:

Serial number: 301406223833
Licensed to: Thomas B. Fomby
SMU
Notes:
1. Unicode is supported; see help unicode_advice.
2. New update available; type -u pdate all-
. use "E:\E5350\E5350 f16\Exercises\charity.dta", clear
. do "C:\Users\00008904\AppData\Local\Temp\STD02000000.tmp"
. summarize gift
Variable Obs Mean Std. Dev. Min Max
gift 4,268 7.44447 15.06256 0 250
. summarize gift if gift == 0
gift 2,561 0 0 0 0
. summarize mailsyear
mailsyear 4,268 2.049555 .66758 .25 3.5
. regress gift mailsyear
Source SS df MS Number of obs = 4,268

F(1, 4266) = 59.65
Model 13349.7251 1 13349.7251 Prob > F = 0.0000
Residual 954750.114 4,266 223.804528 R-squared = 0.0138
Adj R-squared = 0.0136
Total 968099.84 4,267 226.880675 Root MSE = 14.96
gift Coef. Std. Err. t P>|t| [95% Conf. Interval]
mailsyear 2.649546 .3430598 7.72 0.000 1.976971 3.322122

_cons 2.01408 .7394696 2.72 0.006 .5643347 3.463825
. predict yhat
(option xb assumed; fitted values)
. summarize yhat
yhat 4,268 7.44447 1.768784 2.676466 11.28749

Exercise 4 Key - Problem 4 p54 C7 p57

Uploaded by

Copyright:

Available Formats

Exercise 4 Key - Problem 4 p54 C7 p57

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Exercise 4 Key - Problem 4 p54 C7 p57

Uploaded by

Copyright:

Available Formats

ECO 5350 T.

I chose problems 4 and C7.

(iii) The estimated equation is

� = 2.01 + 2.65 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑎𝑎𝑎𝑎

Here is the output from that program:

Single-user Stata perpetual license:

. use "E:\E5350\E5350 f16\Exercises\charity.dta", clear

Variable Obs Mean Std. Dev. Min Max

gift 4,268 7.44447 15.06256 0 250

. summarize gift if gift == 0

Variable Obs Mean Std. Dev. Min Max

Variable Obs Mean Std. Dev. Min Max

mailsyear 4,268 2.049555 .66758 .25 3.5

. regress gift mailsyear

Source SS df MS Number of obs = 4,268

gift Coef. Std. Err. t P>|t| [95% Conf. Interval]

mailsyear 2.649546 .3430598 7.72 0.000 1.976971 3.322122

Variable Obs Mean Std. Dev. Min Max

yhat 4,268 7.44447 1.768784 2.676466 11.28749

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.