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    Chapter 2 - Exercises - Econometrics2

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    Mai Anh
    1. The document discusses panel data regression models using different datasets. It estimates models with firm-level data to examine the effect of job training grants and with country-level data to study the impact of the death penalty on murder rates. It also analyzes enterprise data to evaluate the effect of foreign direct investment on business performance. 2. Key findings include: the coefficient on grants in the firm model was significant, indicating grants increased training; fixed effects models found some evidence of a deterrent effect of the death penalty on murder rates; and the FDI coefficient in the enterprise model was positive and significant, suggesting FDI improved business performance. 3. Larger enterprise size was found to have a positive impact on performance

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    Chapter 2 - Exercises - Econometrics2

    Uploaded by

    Mai Anh
    31 views2 pages
    1. The document discusses panel data regression models using different datasets. It estimates models with firm-level data to examine the effect of job training grants and with country-level data to study the impact of the death penalty on murder rates. It also analyzes enterprise data to evaluate the effect of foreign direct investment on business performance. 2. Key findings include: the coefficient on grants in the firm model was significant, indicating grants increased training; fixed effects models found some evidence of a deterrent effect of the death penalty on murder rates; and the FDI coefficient in the enterprise model was positive and significant, suggesting FDI improved business performance. 3. Larger enterprise size was found to have a positive impact on performance

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    1. The document discusses panel data regression models using different datasets. It estimates models with firm-level data to examine the effect of job training grants and with country-level data to study the impact of the death penalty on murder rates. It also analyzes enterprise data to evaluate the effect of foreign direct investment on business performance. 2. Key findings include: the coefficient on grants in the firm model was significant, indicating grants increased training; fixed effects models found some evidence of a deterrent effect of the death penalty on murder rates; and the FDI coefficient in the enterprise model was positive and significant, suggesting FDI improved business performance. 3. Larger enterprise size was found to have a positive impact on performance

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views2 pages

    Chapter 2 - Exercises - Econometrics2

    Uploaded by

    Mai Anh
    1. The document discusses panel data regression models using different datasets. It estimates models with firm-level data to examine the effect of job training grants and with country-level data to study the impact of the death penalty on murder rates. It also analyzes enterprise data to evaluate the effect of foreign direct investment on business performance. 2. Key findings include: the coefficient on grants in the firm model was significant, indicating grants increased training; fixed effects models found some evidence of a deterrent effect of the death penalty on murder rates; and the FDI coefficient in the enterprise model was positive and significant, suggesting FDI improved business performance. 3. Larger enterprise size was found to have a positive impact on performance

    Copyright:

    © All Rights Reserved
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    of 2

    CHAPTER 2: PANEL DATA REGRESSION

    1. Use the data in JTRAIN to determine the effect of the job training grant on hours of job training
    per employee. The basic model for the three years is
    ℎ𝑟𝑠𝑒𝑚𝑝𝑖𝑡 = 𝛽0 + 𝛿1 𝑑88𝑡 + 𝛿2 𝑑89𝑡 + 𝛽1 𝑔𝑟𝑎𝑛𝑡𝑖𝑡 + 𝛽2 𝑔𝑟𝑎𝑛𝑡𝑖,𝑡−1 + 𝛽3 log(𝑒𝑚𝑝𝑙𝑜𝑦𝑖𝑡 ) + 𝑐𝑖 + 𝑢𝑖𝑡
    a. Estimate the equation using fixed effects. How many firms are used in the FE estimation?
    How many total observations would be used if each firm had data on all variables (in
    particular, hrsemp) for all three years?
    b. Interpret the coefficient on grant and comment on its significance.
    c. Is it surprising that grant21 is insignificant? Explain.
    d. Do larger firms provide their employees with more or less training, on average? How big
    are the differences?
    2. Use the state-level data on murder rates and executions in MURDER for the following
    exercise.
    a. Consider the unobserved effects model
    𝑚𝑟𝑑𝑟𝑡𝑒𝑖𝑡 = 𝜇𝑡 + 𝛽1 𝑒𝑥𝑒𝑐𝑖𝑡 + 𝛽2 𝑢𝑛𝑒𝑚𝑖𝑡 + 𝑐𝑖 + 𝑢𝑖𝑡
    where 𝜇𝑡 simply denotes different year intercepts and ai is the unobserved state effect. If
    past executions of convicted murderers have a deterrent effect, what should be the sign of
    𝛽1? What sign do you think 𝛽2 should have? Explain.
    b. Using just the years 1990 and 1993, estimate the equation from part (i) by pooled OLS.
    Ignore the serial correlation problem in the composite errors. Do you find any evidence for
    a deterrent effect?
    c. Now, using 1990 and 1993, estimate the equation by fixed effects. You may use first
    differencing since you are only using two years of data. Is there evidence of a deterrent
    effect? How strong?
    d. Use all three years of data and estimate the model by fixed effects. Include Texas in the
    analysis. Discuss the size and statistical significance of the deterrent effect compared with
    only using 1990 and 1993.
    3. To evaluate the impact of FDI on business performance, we consider the following model
    ln 𝑉𝐴𝑖𝑡 = 𝛽0 + 𝛽1 ln 𝐾𝑖𝑡 + 𝛽2 ln 𝐿𝑖𝑡 + 𝛽3 𝐹𝐷𝐼𝑖𝑡 + 𝛽4 𝑒𝑑𝑢𝑖𝑡 + 𝛽5 𝑅𝐷𝑖𝑡 + 𝛽6 𝑠𝑖𝑧𝑒𝑖𝑡 + 𝑐𝑖 + 𝑢𝑖𝑡
    where, ln 𝑉𝐴is the natural logarithm of total added value; 𝐹𝐷𝐼 is a dummy variable, equal to
    1 if the enterprise has foreign direct investment, and zero otherwise; ln 𝐾 is the natural
    logarithm of total capital; ln 𝐿 is the logarithm of total labor; 𝑒𝑑𝑢 is labor training cost/total
    labor; 𝑅𝐷 is the total cost of research and development/total investment; 𝑠𝑖𝑧𝑒 is the size of the
    business, the dummy variable includes 4 categories (1-super small; 2-small; 3-medium; 4-
    large), and 𝑠𝑖𝑧𝑒_1 is the base category.
    The estimated results of the panel model are reported below.
    Fixed-effects (within) regression Number of obs = 736,694
    Group variable: ma_thue Number of groups = 105,242

    R-sq: Obs per group:


    within = 0.3026 min = 7
    between = 0.8641 avg = 7.0
    overall = 0.7677 max = 7

    F(8,105241) = 15766.30
    corr(u_i, Xb) = 0.4678 Prob > F = 0.0000

    (Std. Err. adjusted for 105,242 clusters in ma_thue)


    ------------------------------------------------------------------------------
    | Robust
    ln_VA_ | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    ln_K_ | .152219 .0014121 107.80 0.000 .1494513 .1549867
    ln_L_ | .7200339 .0031237 230.51 0.000 .7139116 .7261563
    fdi_ | .2223424 .0356943 6.23 0.000 .1523822 .2923027
    edu_ | .0001049 .0000345 3.04 0.002 .0000373 .0001725
    R&D_ | .0000101 .0000192 -0.53 0.599 -.0000477 .0000275
    |
    size_ |
    2 | .033728 .0042856 7.87 0.000 .0253283 .0421277
    3 | -.0277995 .0080698 -3.44 0.001 -.0436162 -.0119827
    4 | -.0874293 .0115103 -7.60 0.000 -.1099893 -.0648694
    |
    _cons | 3.944356 .0112145 351.72 0.000 3.922376 3.966336
    -------------+----------------------------------------------------------------
    sigma_u | .67424384
    sigma_e | .63714114
    rho | .52827013 (fraction of variance due to u_i)
    ------------------------------------------------------------------------------

    a. How many observations are included in the data? Is the data balanced?
    b. Is the above result estimated from the fixed effects model or the random effects model?
    c. Explain the meaning of the estimate coefficient of the variable 𝐹𝐷𝐼
    d. From the estimated coefficient of the variable 𝑒𝑑𝑢, how do you conclude about the impact
    of spending on labor training on the performance of the enterprise?
    e. From the estimated coefficient of the variable RD, how do you conclude about the impact
    of spending on R&D on the performance of the business?
    f. Can it be concluded that enterprise size has a positive effect on firm performance? Why?

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