Econometrics Problem Set 1

Due November 2nd

Dainn Wie
wie-dainn@grips.ac.jp

October 16, 2012

1. Let's assume that you want to know the average height of Grips students. For that research purpose, you decided to select 10 students as
your sample.
(a) What is population and sample in this case?
(b) What is the random variable of interest in this case?
(c) What is i.i.d condition? Explain the condition in this context.
2. For this question, use the data set cps5.dta, available on the course
web site. This data is drawn from the Current Population Survey. We
will work with the variable WG (hourly wage), and SO, an indicator
variable for whether the individual resides in the South (of the US).
SO equals 1 for residents of the South, and 0 otherwise.
? Please attach your do le and log le for this question.

(a) Provide sample means and standard deviations for the variables
WG and SO.
(b) Estimate the regression model with robust option.
W Gi = 0 + 1 SOi + ui

Report the estimates, standard errors, R2 , and interpret the results.

(c) Graph the data points and the estimated regression line.
1

(d) Based on your OLS estimates, what is the sample average wage
for Southerners?
(e) Consider the hypotesis that 1 = 0. What does this hypothesis
mean in substantive terms? Test the hypothesis at the 5%, 1%,
and 10% signicance levels, and also report the p-values of the
test.
(f) Provide a 95% condence interval for 1 .