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Ps 3
Ps 3
.
Mean(female)=1-0.538=0.462 Female=1000*0.462=462 Fraction of the
462
sample is female= *100% =0.462 *100% =46.2% The average age is
1000
20.261. The minimum monthly incomes are 258.9612. The maximum monthly
incomes are 2618.175. The average monthly incomes in the sample is
86
889.5661. Black=1000*0.086=86. Fraction of the sample is black= *100%
1000
=0.086 *100% =8.6%. Hispanic=1000*0.057=57. Fraction of the sample is
57
Hispanic = *100% =0.057 *100% =5.7%
1000
. sum
2. Regress income on the variable’s male, minority and years of education. For
this and all subsequent regressions, use the “robust” option. Report your
results. Discuss which coefficients are significant (and at what level) and which
are not.
. reg income male minority yrs_educ, robust
Robust
income Coef. Std. Err. t P>|t| [95% Conf. Interval]
.
The coefficient on male is 237.22. The coefficient on minority is -34.96239. The
coefficient on years of education is 44.64197. The intercept is 233.1127. That
mean when male=0, minority=0 and years of education=0. the income is
233.1127.
^income=¿ 233.1127 ¿+237.22 X male−34.9624 X minority +44.64197 X years of education
H 0 male : β male=0 H 1 male : β male ≠ 0
t male=11.67 t male >¿2.58
Since t male >¿2.58 (the critical value for α =1 %) we can reject the null hypothesis
at the 1% significance level. we conclude that male is associated with higher
income.
H 0 minority : β minority =0 H 1 minority : β minority ≠ 0
t minority=-1.21 |t minority|<1.96
Since |t minority|<1.96 (the critical value for α =5 %) we cannot reject the null
hypothesis at the 5% significance level. we conclude that minority may not
associated with income.
H 0 years of education : β years of education=0 H 1 years of education : β years of education ≠ 0
t years of education =6.84 t years of education>2.58
Since t years of education>2.58 (the critical value for α =1 %) we can reject the null
hypothesis at the 1% significance level. we conclude that years of education is
associated with income.
H 0 intercept : β intercept=0 H 1 intercept : β intercept ≠ 0
t intercept=2.91 t intercept >2.58
Since t intercept >2.58(the critical value for α =%) we can reject the null hypothesis at
the 1 significance level. we conclude that intercept is associated with income.
3. Now regress income on the variables male, minority, years of education and
married. Which coefficients are significant and at what level? Also, what is the
estimated change in income associated with marriage, for males, and for
females?
Robust
income Coef. Std. Err. t P>|t| [95% Conf. Interval]
From this we can see that men, whether married or not, are likely to earn more
than women under the same conditions.
4. You are the lead advisor to a senator who sees your results and points out
that since married young people earn more than unmarried young people, it
would be good policy to promote marriage among young members of the labor
market. Is this a correct conclusion to draw? Why or why not?
The observational data that was discussed suffers from omitted variable bias
which makes the coefficient on married positive, large in magnitude and
statistically significant unless the correct variables are controlled for. There may
also be other omitted variables that we do not have data on.
Therefore, our best estimate allows us to reject the null hypothesis. In other
words, we find evidence that marriage may be effective in raising incomes.
However, due to external validity considerations, we cannot use the
conclusions of this randomized trial to generalize all types of guidance items.
For example, there may be great differences between regions or ages.
Therefore, a sensible recommendation is to start a mentoring program and take
some action based on the available data, but to ensure that it is evaluated,
preferably using randomized trials.
5. Now generate a new variable that is equal to the interaction of the dummies
for “male” and “yrs_educ” (call it male_educ). Run the same regression as in 3
but include your new variable among the independent variables. Interpret the
coefficient on education. Interpret the coefficient on the interaction of male and
education. Which of these two coefficients are statistically significant? At what
level?
. gen male_educ= male* yrs_educ
Robust
income Coef. Std. Err. t P>|t| [95% Conf. Interval]
.
income=¿ 164.302¿ +280.1631 X male +48.6959 X years of education+
^
63.0079 X married −27.4695 X minority −3.2463 X male educ
t male educ
= -0.26 |t male |<1.96
educ
Since |t male |<1.96(the critical value for α =5 %) we cannot reject the null
educ
Robust
income Coef. Std. Err. t P>|t| [95% Conf. Interval]
t min
male
= -1.35 |t min |<1.96
male
Robust
income Coef. Std. Err. t P>|t| [95% Conf. Interval]
.
income=¿ 422.5728+ 46.26233 X years of education−0.5935477 X years of education ¿
2
2. Can you interpret the coefficient on yrs_educ? If so, interpret it. If not,
explain why not.
The coefficients in polynomial regressions do not have a simple
interpretation. The best way to interpret polynomial regression is to plot the
estimated regression function and calculate the estimated effect on income
associated with a change in yrs_educ for one or more values of yrs_educ.
3. What is the predicted difference in income between people with 11
and 12 years of educ?
^
income 12=¿ ¿892.2499 ^ income 11=¿ ¿859.6392 The predicted difference
in income between people with 11 and 12 years of educ is 32.5107.
4. What is the predicted difference in income between people with 15
and 16 years of educ?
income 16=¿ ¿1010.8219
^ ^income 15=¿ ¿982.9595
The predicted difference in income between people with 15 and 16 years
of educ is 27.8624.
Plus
Robust
income Coef. Std. Err. t P>|t| [95% Conf. Interval]
( 1) yrs_educ = 0
( 2) yrs_educ2 = 0
F( 2, 997) = 13.31
Prob > F = 0.0000
H 0 years of education : β years of education =0 ¿ β years of education 2=0
H 1 years of education : β years of education ≠ 0∨β years of education 2 ≠ 0
Therefore, we can reject the null hypothesis the 5% significance level. we
conclude that Any variable may have an income correlation.
(0.0289074) (0.0282038)
years of 0.0492057***
education
(0.0072806)
Robust
ln_income Coef. Std. Err. t P>|t| [95% Conf. Interval]
Robust
ln_income Coef. Std. Err. t P>|t| [95% Conf. Interval]
H 0 min educ
: β min =0
educ
H 1 min : β min ≠ 0
educ educ
hypothesis at the 5% significance level. we conclude that min educ may not
associated with income. Based that, we can say that education may not
different for minorities and non-minorities.