Introduction to Econometrics, 3

rd
Edition, Global Edition
Solutions to End-of-Chapter Empirical Exercises*
For Instructors Only
Chapter 3: Review of Statistics
AHE
AHE
AHE AHE
AHE
AHE
AHE AHE
High School
College
College-High School
High School
College
College-High School
AHE
HS
AHE
HS
AHE
Col
AHE
Col
Col-HS Gap
Col-HS Gap
Gap Gap
m
Y
s
m
n
m
w
Y
s
w
n
w
m
Y
w
Y SE
m
Y
w
Y
Chapter 4: Linear Regression with One Regressor
AHE Age
R
C
o
u
r
s
e
E
v
a
l
u
a
t
i
o
n
Beauty Index
-2 -1 0 1 2
2
3
4
5
Course Eval Beauty Beauty
Course_Eval
Beauty
Course_Eval
Beauty is
R Beauty
Ed Dist
R
Growth
Trade Share
0 .5 1 1.5 2
-5
0
5
10
Growth Tradeshare
Growth Tradeshare
Chapter 5: Regression with a Single Regressor: Hypothesis Tests and Confidence Intervals
AHE Age
t p
AHE Age
t p
AHE Age
t p
College HighScool
SE
College HighScool
Course Eval Beauty
t p
Ed Dist
t p
Ed Dist
Chapter 6: Linear Regression with Multiple Regressors
Model
Regressor
a b
R
Dependent Variable
Regressor
Beauty Course_eval
Model
Regressor
a b
SER
R
R
R R SER
R R n
STWMFG
CUE80
Regressor Coefficient
SER
R
R
Rev_Coups
i i
Oil X
Chapter 7: Hypothesis Tests and Confidence Intervals in Multiple Regression
Model
Regressor a b
SER
R
R
Age AHE
R R n
F-
Female Bachelor
Age Female Age Bachelor Cor Age,
Female Cor Age,Bachelor
Model
Regressor a b c
SER
R
R
Intro
Model
Regressor (a) (b) (c)
F-statistic
urban tuition
SER
R
R
Dist
Dist
Dist
Dist
Dist
Black Hispanic
Regressor Coefficient
SER
R
R
F p
Chapter 8: Nonlinear Regression Functions
Data from 2008
(1) (2) (3) (4) (5) (6) (7) (8)
Dependent Variable
AHE ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE)
Age
Age
Age
Female Age
Female Age
Bachelor Age
Bachelor Age
Female
Bachelor
Female Bachelor
F-statistic and p-values on joint hypotheses
F
Age
Age Age
SER
R
Age
Age
AHE Age
Age
AHE
Age AHE
AHE Age
Age
Age
AHE
Age Age
AHE
Age
AHE
Age AHE
R R
Age Age
t
Age
Female
Bachelor
Female
Bachelor Bachelor AHE
AHE
AHE
AHE
Female Age Age F
F
p
Age AHE
Bachelor Age Age F
p
Age AHE
Age Age Female
Bachelor AHE
Gender, Education Predicted ln(AHE) at Age
Predicted Increase in ln(AHE)
(Percent per year)
25 32 35 25 to 32 32 to 35
Dependent Variable Course_Eval
Regressor (1) (2) (3) (4)
Beauty
Intro
OneCredit
Female
Minority
NNEnglish
Age
Age
Female Beauty
Male Beauty
Intercept
F-statistic and p-values on joint hypotheses
Age Age
SER
R
Age
Age F
Age Age
Age
Female Beauty
Beauty
Female
Beauty Male Beauty
Beauty Beauty
ED
(1) (2) (3) (4) (5)
Regressor ED ln(ED) ED ED ED
Dist
Dist
Tuition
Female
Black
Hispanic
Bytest
Incomehi
Ownhome
DadColl
MomColl
DadColl MomColl
Cue80
Stwmfg
Incomehi Dist
Incomehi Dist
Intercept
F-statistic and p-values on joint hypotheses
Dist Dist
Incomehi Dist
Incomehi Dist
SER
R
Dist
Dist
AHE Age
Dist
ED
Dist ED
ED Dist
Dist ED
Dist ED
Dist Dist
t Dist
Dist
Dist
Dist
Dist
MomColl DadColl
DadColl
MomColl
DadColl MomColl
Incomehi Dist
Dist Dist Dist
Incomehi
ED Dist Dist
Incomehi
ED Dist Dist
Dist Dist
Incomehi Incomehi
Incomehi
Dist ED F
Incomehi Dist Incomehi Dist p
Dist
Dependent variable Growth
Regressor (1) (2) (3) (4) (5)
TradeShare
TradeShare
TradeShare
YearsSchool
ln(YearsSchool)
Rev_coups
Assassinations
ln(RGDP60)
TradeShare ln(YearsSchool)
Intercept
F-statistic and p-values on joint hypotheses
Rev_coups and Assassinations
TradeShare and TradeShare
SER
R
G
r
o
w
t
h
Years of School
0 5 10
-5
0
5
10
Growth YearsSchool
Growth
Growth
t TradeShare YearsSchool
TradeShare TradeShare
F
Chapter 9: Assessing Studies Based on Multiple Regression
Data from 2008
(1) (2) (3) (4) (5) (6) (7) (8)
Dependent Variable
AHE ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE)
Age
Age
Age
Female Age
Female Age
Bachelor Age
Bachelor Age
Female
Bachelor
Female Bachelor
F-statistic and p-values on joint hypotheses
F
Age
Age Age
SER
R
Data from 1992
(1) (2) (3) (4) (5) (6) (7) (8)
Dependent Variable
AHE ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE) ln(AHE)
Age
Age
Age
Female Age
Female Age
Bachelor Age
Bachelor Age
Female
Bachelor
Female Bachelor
F-statistic and p-values on joint hypotheses
F
Age
Age Age
SER
R
AHE
Ability
Ability
Occupation
Occupation Age
Age
Age
Age
AHE
AHE
Age
Results using (8) from the 2008 Data
Gender, Education
Predicted Value of ln(AHE) at
Age
Predicted Increase in ln(AHE)
(Percent per year)
25 32 35 25 to 32 32 to 35
Results using (8) from the 1992 Data
Gender, Education
Predicted Value of ln(AHE) at
Age
Predicted Increase in ln(AHE)
(Percent per year)
25 32 35 25 to 32 32 to 35
Internal Validity
Omitted variable bias.
Beauty
Wrong functional form. Female
Beauty
t Beauty
Measurement error in the regressors. Beauty
down
Beauty
understate Beauty
Sample selection bias.
Beauty
Beauty Beauty
u
Simultaneous causality bias.
Beauty
Beauty
External Validity
Policy Advice
Beauty
Beauty
Course
Evaluation
Beauty
Beauty moral
legal
Incomehi Ownhome
Incomehi Ownhome
Regression Results for Non-Western and Western States
Non-West West
2
Ownhome
Stwmfg
Incomehi Dist
Incomehi Dist
F-statistics (p-values) and measures of fit
Dist Dist
Incomehi Dist
Incomehi Dist
R
N
Non West
West
n
n
Non West West Non West West
SE SE SE
Dist
Dist Dist
Incomehi Dist Incomehi Dist
Incomehi
Incomehi
Bytest
Chapter 10: Regression with Panel Data
(1) (2) (3) (4)
Shall
incar_rate
density
avginc
Pop
pb1064
pw1064
pm1029
Intercept
State Effects
Time Effects
F-Statistics and p-values testing exclusion of groups of variables
Time Effects
shall
shall
shall
Dependent Variable ln(rob)
(1) (2) (3) (4)
shall
F-Statistics and p-values testing exclusion of groups of variables
Time Effects
Dependent Variable ln(mur)
shall
F-Statistics and p-values testing exclusion of groups of variables
Time Effects
shall
Shall Shall
Regressor (1)
sb_usage
speed65
speed70
ba08
drinkage21
lninc
age
State Effects
Year Effects
positive
increase
SB
sb_usage
SB
F p
sb useage primary secondary
speed65, speed70, ba08, drinkage21, logincome, age, time effects, state effects
primary secondary
Chapter 11: Regression with a Binary Dependent Variable
(1) (2) (3)
Linear
Probability
Linear
Probability Probit
Smkban
Age
Age
Hsdrop
Hsgrad
Colsome
Colgrad
Black
Hispanic
Female
Intercept
F-statistic and p-values on joint hypotheses
Education indicators
smoker
p SE p
smkban
t
F p
Colgrad
HSdrop
Age
t
F
z z
( ) ( ) Prob smoke z
z z
( ) ( ) Prob smoke z
smkban
Dependent Variable
Insured Insured Insured Healthy Healthy Healthy Any
Limitation
Regressor
(1) (2) (3) (4) (5) (6) (7)
selfemp
age
age
age selfemp
deg_ged
deg_hs
deg_ba
deg_ma
deg_phd
deg_oth
familysz
race_bl
race_ot
reg_ne
reg_mw
reg_so
male
married
Intercept
p SE p
increases
Age
Age
Age
Age selfemp
selfemp
Age
selfemp
Age
selfemp
Age
healthy
Chapter 12: Instrumental Variables Regression
Seas
Regressor OLS 2SLS
Price
Ice
Seas intercept
F-
Price
Cartel
Cartel
Cartel
F
Estimation Method Regressor
OLS IV IV
Morekids
Additional Regressors Intercept Intercept Intercept, agem1,
black, hispan, othrace
F
Morekids
Morekids
morekids samesex
morekids samesex
samesex
samesex t
Samesex any
F F
samesex
Morekids
samesex agem1, black, hispan, othrace,
Estimation Method Regressor
OLS IV IV
Morekids
Additional Regressors Intercept Intercept Intercept, agem1, black,
hispan, othrace
F
Morekids
Morekids
morekids samesex
morekids samesex
samesex
samesex t
Samesex any
F F
samesex
Morekids
samesex agem1, black, hispan, othrace,
F
F Y X Z
Chapter 13: Experiments and Quasi-Experiments
Dependent Variable Call_Back
Regressor (1) (2) (3) (4)
Black
Female Black
High
High Black
Intercept
Black-Sounding Names White-Sounding Names Black-White Difference
Variable n X
se X
n X
se X
b w
X X se
b w
X X
t-stat
X
X x X/
x x
X
X
Dependent Variable Trade
All Traders Dealers Non-Dealers
Regressor (1) (2) (3) (4) (5) (6) (7) (8)
Goodb
Years_trade >
Trades Per Month >
Intercept
t p t
p
Years_trade
Trades Per Month
Chapter 14: Introduction to Time Series Regression and Forecasting
Mean Standard Deviation
GPD
t
GDP
t
GPD
t
GDP
t
Lag Autocorrelation
t
Y Y
t
R SER
t
Y Y
t
Y
t
R SER
BOLD
Lag BIC AIC
9.4413
9.4752
Y
t
Y
t
Y
t
t Y
t
t t
F
t
Y Y
t
R R R R
R SER
R
F p
F
Selected Pseudo Out-Of-Sample Forecast Results
(percentage points at an annual rate)
Model Forecast Error Mean (SE) RMSFE
Regressors (1) (2) (3)
Excess Return
t
Excess Return
t
Excess Return
t
Excess Return
t
Intercept
F p
R
(1) (2) (3)
Estimation Period 1932:1 2002:12 1932:1 2002:12 1932:1 1982:12
Regressors
Excess Return
t
Excess
dividend yield
t
dividend yield
t
dividend yield
t
Intercept
F p
R
Model RMSFE
Chapter 15: Estimation of Dynamic Causal Effects
O
t
t
O
t
O
t
t
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
0.00
0.05
0.10
0.15
0.20
0.25
0.30
m T m
F p
Comment [JK1]:
Dynamic Effect of Oil on IPGrowth
(a) Estimated Dynamic Multipliers and 95%Confidence Interval
0 1 2 3 4 5 6 7 8 9 10111213 141516 1718
- 8
- 6
- 4
- 2
0
2
4
(b) EstimatedCumulativeMultipliersand95%ConfidenceInterval
0 1 2 3 4 5 6 7 8 9 101112131415161718
- 30
- 25
- 20
- 15
- 10
- 5
0
5
O
t
CPI PCED
Y Y Y
CPI
PCED
Y
CPI PCED
E Y E
CPI
E
PCED
Y
t
u
t
E Y
t
E u
t
E u
t
u
t
Y
t
PCED CPI
Y u
m
T m
Chapter 16: Additional Topics in Time Series Regression
F p
R Y
Y R
Minimized Value Shown in Bold
Lag BIC AIC
-10.1262
-10.3988
Summary statistics for forecast errors 1990:22004:4
Model Mean (SE) Standard Deviation RMSFE
t
t
ADF t-statistic DF-GLS t-statistic
CPI
PCE
CPI PCE
CPI PCE CPI
p p
PCE
p
CPI PCE CPI PCE
p-
CPI PCE
I
CPI PCE
I
CPI PCE
t
m
t
Y Y
t
t t
u
t
GARCH(1,1) Bands For GDPGrowth
1960 1970 1980 1990 2000
-0.03
-0.02
-0.01
0.00
0.01
0.02
0.03
0.04