ECO304_WEEK7_HW Answers
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Apr 3, 2024
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ECO304: Analytics for Economics
WEEK 7 Homework: Specification of Regression Model Submit STATA do file as a txt file with explanation you found (10 Points Total)
I. 2018 Current Population Data (6 points) Using the following CPS data, select only the first person from each family. . clear all . use https://bigblue.depaul.edu/jlee141/econdata/cps_data/cepr_march_2018.dta . keep if perno == 1 1)
Using dummy variables, perform a statistical test on the difference of means on total household income (rinch_all). a.
By race (wbhao) tab wbhao, gen(race) reg rinch_all race2-race5 Since the race2 to race5 variables are the dummy variables, the coefficients are the average of the real household income by race. Using F test, you can test if they have different means. The p-value from F statistics shows zero, which means p is less than 5% and 1%, thus are significatly different. b.
By family type (famtyp)
Since the family2 to family5 variables are the dummy variables, the coefficients are the average of the real household income by family type. Using F test, you can test if they have different means. The p-value from F statistics shows zero, which means p is less than 5% and 1%, thus are significatly different. 2)
Select only the first person for each family (keep if perno == 1), and estimate the following models. Carefully explain the meaning of the estimated coefficient ,
b
1
, for each model. Model1: ࠵?
!
= ࠵?0 + ࠵?1 ࠵?
!
+ ࠵?
!
Model2: ࠵?
!
= ࠵?0 + ࠵?1 ࠵?࠵?࠵?࠵?
!
+ ࠵?
!
Model3: ࠵?࠵?࠵?࠵?
!
= ࠵?0 + ࠵?1 ࠵?
!
+ ࠵?
!
Model4: ࠵?࠵?࠵?࠵?
!
= ࠵?0 + ࠵?1 ࠵?࠵?࠵?࠵?
!
+ ࠵?
!
where Xi = Total household income (rinch_all) Yi = Total child care spending (careval)
reg careval rinch_all eststo reg careval log_rinch_all eststo reg log_careval rinch_all eststo reg log_careval log_rinch_all eststo esttab Model1: ࠵?
!
= ࠵?0 + ࠵?1 ࠵?
!
+ ࠵?
!
If one dollar increase in the real household income, there are 0.02 dollar changes in the child care Model2: ࠵?
!
= ࠵?0 + ࠵?1 ࠵?࠵?࠵?࠵?
!
+ ࠵?
!
If one percent increases in the real household income, there is 2999/100 = 29.99 dollars increases in the child care spending. Model3: ࠵?࠵?࠵?࠵?
!
= ࠵?0 + ࠵?1 ࠵?
!
+ ࠵?
!
If one dollar increases in the real household income, there is 0.00000283*100 = 0.000283 percent changes in the child care spending. Model4: ࠵?࠵?࠵?࠵?
!
= ࠵?0 + ࠵?1 ࠵?࠵?࠵?࠵?
!
+ ࠵?
!
If one percent increases in the real household income, there is 0.512 percent changes in the child care spending. 3)
Find the best suitable model from 2) and estimate a regression model including race dummy variables (wbhao) as independent variables. Carefully explain the difference among the race groups. Suppose you chose the last model, and run a regression model with race variables:
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