Chapter 13, Problem 25PE

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General Accounting problem 25

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Problem 3 Stata Output Analysis Suppose a study investigates the causal effect of education on wages. Table 1 reports the results of an OLS regression of wages (wage per hour in dollars) on education (years in education). Table 1 Source SS df MS Number of obs = 3,017 F(1, 3015) = 298.39 Model Residual 18904467 191011981 1 18904467 3,015 63353.8909 Prob > F 0.0000 R-squared 0.0901 Adj R-squared 0.0898 Total 209916448 3,016 69600.9444 Root MSE 251.7 wage Coef. Std. Err. t P>|t| [95% Conf. Interval] education cons 29.56644 183.9342 1.711605 23.15976 17.27 0.000 7.94 0.000 26.21041 138.5237 32.92247 229.3447 a. How would you write this relationship using the Core Model? (5 points) b. What is the value for B₁, the coefficient on Education? (2 points) C. What is the standard error of ẞ₁? (2 points) d. What is the R squared for the model? (2 points) e. What is the t statistic for ₁at the 5% level of significance? (2 points) Λ f. What is the 95% confidence interval for B₁? (2 points) Λ g.…

The ending inventory for the year would be

Problem 2 Hypothesis Testing Suppose you are interested in the effect of neighborhood crime incidents on high school graduation rates. You run the following regression model: Graduation; ßo+ß₁Crime; +ɛ¿ = You would like to test whether the neighborhood crime incidents have a statistically significant effect on high school graduation rate at the 5% level of significance (α = 0.05). You estimate the model and find that B₁ = -0.04 and se (B₁) = 0.008. a. Write down the null hypothesis and alternative hypothesis. (4 points) b. Calculate thet statistic of B₁. (5 points) C. What is the critical value of thet statistic for the 5% level of significance? (2 points) d. Calculate the 95% confidence interval for the coefficient on Crime? (6 points) e. Based on your answers to the questions b, c, and d, do you reject or fail to reject the null hypothesis you defined in question a? Justify your answer. (5 points) Λ f. Isẞ₁ statistically significant at the 5% level? (3 points)

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Problem 1 Endogeneity & Bias The ACT (an abbreviation of American College Testing) is a standardized test used for college admissions in the United States. Suppose you are interested in whether ACT preparation improves ACT scores. Consider the following model: ACT=B+B Preparation,+e; where Preparation measures the number of hours spent on ACT preparation and ACT is ACT scores. Each student is denoted by the subscript i. Suppose you estimate = - 21 andß₁ = 0.9. a. What is the dependent variable? What is the independent variable? (3 points) b. How do you interpret ẞ = 21 in this context? (4 points) 0 C. How do you interpretß₁ = 0.9 in this context? (4 points) 1 d. Describe a scenario which can cause the independent variable to be endogenous. (4 points)