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Lecture

# Practice Problem Solutions.pdf

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School
Department
Economics
Course
ECON 3210
Professor
All Professors
Semester
Fall

Description
Econ 3210Use of Economic DataYork University Department of Economics Professor Xianghong LiPractice ProblemsSolutionsCheck the file PracticeProblemcommandsdo file for all computer related exercisesChapter 1 1a Here is one way to put the thought experiment If two firms say A and B are identical in all respects except that firm A supplies job training one hour per worker more than firm B by how much would firm As output of nondefective product differ from firm Bs note that you have other way of putting it such as random assignment of job training among firms producing certain comparable product b Firms are likely to arrange job training depending on the characteristics of workers Some observed characteristics are education job market experience and experience in a particular jobRegarding unobserved characteristics perhaps firms choose to offer training to more or less able workersAability might be difficult to quantify although a manager has some idea about the relative abilities of different employeesc The amount of capital and technology available to workers would affect output So two firms with exactly the same kinds of employees would generally have different outputs if they use different amounts of capital or technologyd No unless the amount of training is randomly assigned The many factors listed in b and c can contribute to finding a positive correlation between output and training even if job training does not improve worker productivity For example if firms decide to provide trainings to workers with higher ability we would find the correlation to be positive even though the training doesnt help at all Computer Exercises C11 a The sample average of education is 1256 years with the minimum to be 0 and the maximum to be 18 b The sample average hourly wage is 590 seems to be rather low quite below the current minimum wage in the US c Historical US CPI httpwwwminneapolisfedorgcommunityeducationteachercalchist1913cfm Based on this website the CPI was 569 in 1976 and 2181 in 20101d To convert 1976 dollar into 2010 dollar we have 218159 2261 569Now it seems to be reasonableThere are 252 women and 274 men in the sample e C12185a The fraction of men receiving training is 042445b The average earnings for men receiving training is 6350 dollars and 4550 dollars for men not receiving training The difference of 1800 dollars is very large economically about 40 increase in earnings 45c Among men receiving training the unemployment rate is about 02418592 035 It is an 11 percentage points difference This rate is about 260again very large C13 see STATA commandsAppendix B1 The weights for the two three and fourcredit courses are 29 39 and 49 threspectivelyLet Y be the grade in the j course j1 2 and 3 and let X be the joverall grade point averageThen X29Y39Y49Y and the 123expected value is EX29EY39EY49EY293512339304930791293112 a EGPASAT8007000280023Similarly EGPASAT140070002140035b We use the law of iterated expectationsSince EGPASAT70002 SAT the unconditional expected value of GPA isEGPAEEGPASAT70002ES A T 70002ESAT70002110029 c If a students SAT score is 1100 that does not mean he or she will have a GPA of 29 29 is the population mean of the university a random pick from the population does not necessarily equal the population meanEXYEEXYX3 By the law of iterated expectationsand 2
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