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2. A data set contains the following variables, each of which has been observed for 753 women. Variable Description Average inlf = 1 if in the labour force and zero otherwise 0.56 nwifeinc 20.12 household income earned by other household members annually (thousands of dollars) age age of the woman 42.5 educ years of education completed 12.3 exper 10.6 years of experience in the labour market number of children aged less than 6 kidslt6 0.23 kidsge6 number of children aged 6 or older 1.35 (a) Consider the following model for labour force participation inlfi Bo + Binwifeinc, + B₂agei + Ui to be estimated using the dataset just described. Given the binary nature of the dependent variable, explain why OLS is not the Best Linear Unbiased Estimator: What other issues, if any, need addressing? (b) Suggest an alternative estimation method and discuss how it will address the issues you note in part (a).

2. A data set contains the following variables, each of which has been observed for 753 women. Variable Description Average inlf = 1 if in the labour force and zero otherwise 0.56 nwifeinc 20.12 household income earned by other household members annually (thousands of dollars) age age of the woman 42.5 educ years of education completed 12.3 exper 10.6 years of experience in the labour market number of children aged less than 6 kidslt6 0.23 kidsge6 number of children aged 6 or older 1.35 (a) Consider the following model for labour force participation inlfi Bo + Binwifeinc, + B₂agei + Ui to be estimated using the dataset just described. Given the binary nature of the dependent variable, explain why OLS is not the Best Linear Unbiased Estimator: What other issues, if any, need addressing? (b) Suggest an alternative estimation method and discuss how it will address the issues you note in part (a).

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter10: Statistics
Section10.6: Summarizing Categorical Data
Problem 23PPS
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2. A data set contains the following variables, each of which has been observed for 753 women. Variable Description Average inlf = 1 if in the labour force and zero otherwise 0.56 nwifeinc 20.12 household income earned by other household members annually (thousands of dollars) age age of the woman 42.5 educ years of education completed 12.3 exper 10.6 years of experience in the labour market number of children aged less than 6 kidslt6 0.23 kidsge6 number of children aged 6 or older 1.35 (a) Consider the following model for labour force participation inlfi Bo + Binwifeinc, + B₂agei + Ui to be estimated using the dataset just described. Given the binary nature of the dependent variable, explain why OLS is not the Best Linear Unbiased Estimator: What other issues, if any, need addressing? (b) Suggest an alternative estimation method and discuss how it will address the issues you note in part (a).
Transcribed Image Text:2. A data set contains the following variables, each of which has been observed for 753 women. Variable Description Average inlf = 1 if in the labour force and zero otherwise 0.56 nwifeinc 20.12 household income earned by other household members annually (thousands of dollars) age age of the woman 42.5 educ years of education completed 12.3 exper 10.6 years of experience in the labour market number of children aged less than 6 kidslt6 0.23 kidsge6 number of children aged 6 or older 1.35 (a) Consider the following model for labour force participation inlfi Bo + Binwifeinc, + B₂agei + Ui to be estimated using the dataset just described. Given the binary nature of the dependent variable, explain why OLS is not the Best Linear Unbiased Estimator: What other issues, if any, need addressing? (b) Suggest an alternative estimation method and discuss how it will address the issues you note in part (a).
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