Scribd
Upload
2 views

exercises_chapter2_part1_2

The document contains exercises from Chapter 2 of the Wooldridge textbook, focusing on various regression models related to fertility, birth weight, CEO salaries, sleep and work trade-offs, and the impact of IQ on wages. Each exercise prompts analysis of datasets and requires the estimation of regression equations, interpretation of results, and understanding of causal relationships. The exercises cover a range of topics including education's effect on fertility, smoking's impact on birth weight, CEO tenure and salary, and the relationship between IQ and wages.

Uploaded by

annikatalpade.2023
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
2 views

exercises_chapter2_part1_2

The document contains exercises from Chapter 2 of the Wooldridge textbook, focusing on various regression models related to fertility, birth weight, CEO salaries, sleep and work trade-offs, and the impact of IQ on wages. Each exercise prompts analysis of datasets and requires the estimation of regression equations, interpretation of results, and understanding of causal relationships. The exercises cover a range of topics including education's effect on fertility, smoking's impact on birth weight, CEO tenure and salary, and the relationship between IQ and wages.

Uploaded by

annikatalpade.2023
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Exercises Chapter 2 (Numbers as in the Wooldridge textbook)

1
Let kids denote the number of children ever born to a woman, and let educ denote years of
education for the woman. A simple model relating fertility to years of education is

kids = β0 + β1 educ + u

where u is the unobserved error.

(i) What kind of factors are contained in u? Are these likely to be correlated with level of
education?

(ii) Will a simple regression analysis uncover the ceteris paribus effect of education on fertil-
ity? Explain.

4
The dataset BWGHT.DTA contains data on births to women in the United States. Two
variables of interest are the dependent variable, infant birth weight in ounces (bwght), and
an explanatory variable, average number of cigarettes the mother smoked per day during
pregnancy (cigs). The following regression was estimated using data on n = 1, 388 births:

\ = 119.77 − 0.514 cigs


bwght

(i) What is the predicted birth weight when cigs = 0? What about when cigs = 20 (one
pack per day)? Comment on the difference.

(ii) Does the simple regression necessarily capture a causal relationship between the child’s
birth weight and the mother’s smoking habits? Explain.

(iii) To predict a birth weight of 125 ounces, what would cigs have to be? Comment.

(iv) The proportion of women in the sample who do not smoke while pregnant is about .85.
Does this help to reconcile your finding from part (iii)?

C2
The dataset CEOSAL2.DTA contains information on chief executive officers for U.S. corpora-
tions. The variable salary is annual compensation, in thousands of dollars, and ceoten is prior
number of years as company CEO.

(i) Find the average salary and the average tenure in the sample.

(ii) How many CEOs are in the first year as CEO (that is, ceoten = 0)?. What is the longest
tenure as a CEO?

(iii) Estimate the simple regression model

log(salary) = β0 + β1 ceoten + u. (1)

1
Report your results. What is the (approximate) predicted percentage increase in salary
given one more year as a CEO?

C3
Use the data SLEEP75.DTA from Biddle and Hamermesh (1990) to study whether there is a
tradeoff between the time spent sleeping per week and the time spent in paid work. We could
use either variable as the dependent variable. For concreteness, estimate the model

sleep = β0 + β1 totwork + u, (2)

where sleep is minutes spent spleeping at night per week and totwrk is total minutes worked
during the week.

(i) Report your results in equation form along with the number of observations and R2 .
What does the intercept of the equation mean?

(ii) If totwrk increases by 2 hours, by how much is sleep estimated to fall? Do you find this
to be a large effect?

C4
Use the data WAGE2.DTA to estimate a simple regression explaining monthly salary (wage)
in terms of IQ score (IQ)

(i) Find the average salary and average IQ in the sample. What is the sample standard
deviation of IQ? (IQ scores are standardized so that the average in the population is 100
with a standard deviation equal to 15.)

(ii) Estimate a simple regression model where a one-point increase in IQ changes wage by
a constant dollar amount. Use this model to find the predicted increase in wage for an
increase in IQ of 15 points. Does IQ explain most of the variation in wage?

(iii) Now, estimate a model where each one-point increase in IQ has the same percentage
effect on wage. If IQ increases by 15 points, what is the approximate percentage increase
in predicted wage?

C5
For the population of firms in the chemical industry, let rd denote annual expenditures on
research and development, and let sales denote annual sales (both are in millions of dollars).

(i) Write down a model (not an estimated equation) that implies a constant elasticity between
rd and sales. Which parameter is the elasticity?

(ii) Now, estimate the model using the data in RDCHEM.RAW. Write out the estimated
equation in the usual form. What is the estimated elasticity of rd with respect to sales?
Explain in words what this elasticity means.

2
References

Biddle J., Hamermesh D. 1990. Sleep and the Allocation of Time. Journal of Political
Economy 98(5):922–943

You might also like