3. Consider the following regression equation, where Cigs is daily spending on cigarettes in poundssterling (£), Y earsEduc is years of education, and F emale equals one if an individual is femaleand zero otherwise (standard errors in parentheses):Cigs [ = 4(1.6)− 0.08(0.032)Y earsEduc − 0.5(0.2)F emale,(a) Interpret the coefficients on Y earsEduc and F emale. (b) What does the model predict the average daily spending on cigarettes would be for womenwith 12 years of education? (c) Form the 95% confidence interval for the coefficient on F emale. (d) Economists are often interested in estimating production functions of the Cobb-Douglas form(Yiis the ith firm’s output, Liits spending on labour, and Kiits spending on capital):Yi = ALαi Kβi,How might someone estimate α and β from this equation using linear regression?
3. Consider the following regression equation, where Cigs is daily spending on cigarettes in pounds
sterling (£), Y earsEduc is years of education, and F emale equals one if an individual is female
and zero otherwise (standard errors in parentheses):
Cigs [ = 4
(1.6)
− 0.08
(0.032)
Y earsEduc − 0.5
(0.2)
F emale,
(a) Interpret the coefficients on Y earsEduc and F emale.
(b) What does the model predict the average daily spending on cigarettes would be for women
with 12 years of education?
(c) Form the 95% confidence interval for the coefficient on F emale.
(d) Economists are often interested in estimating production functions of the Cobb-Douglas form
(Yi
is the i
th firm’s output, Li
its spending on labour, and Ki
its spending on capital):
Yi = ALα
i K
β
i
,
How might someone estimate α and β from this equation using linear regression?
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