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solutions chapter 7.pdf

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Department
ECON
Course
ECON305
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All Professors
Semester
Summer

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CHAPTER7 Exercise Solutions 141 Chapter 7 Exercise Solutions Principles of Econometrics 3e142 EXERCISE 71 a Whena GPA is increased by one unit and other variables are held constant average starting salary will increase by the amount 1643and the coefficient is 466tsignificant at 0001Students who take econometrics will have a starting salary which is 5033 higher on average than the starting salary of those who did not take econometricsand the coefficient is significant at 0001The intercept 1103tsuggests the starting salary for someone with a zero GPA and who did not take econometrics is 24200However this figure is likely to be unreliable since there would 2be no one with a zero GPA The R074 implies 74 of the variation of starting salary is explained by GPA and METRICSb A suitably modified equation isSALGPAMETRICSFEMALEe 1234is an intercept dummy variable that captures the effect of genderThen the parameter 4on starting salary all else held constantif 0GPAMETRICSFEMALE123 ESALGPAMETRICSFEMALEif 11423 c To see if the value of econometrics is the same for men and women we change the model to SALGPAMETRICSFEMALEMETRICSFEMALEe12345is an intercept dummy variable that captures the effect of genderThen the parameter 4 is a slope dummy variable that on starting salary all else held constant The parameter 5captures any change in the slope for females relative to malesif 0GPAMETRICSFEMALE123 ESALif 1GPAMETRICSFEMALE14235 Chapter 7 Exercise Solutions Principles of Econometrics 3e143 EXERCISE 72 a Considering each of the coefficients in turn we have the following interpretationsInterceptAt the beginning of the time period over which observations were taken on a day which is not Friday Saturday or a holiday and a day which has neither a full moon nor a half moon the estimated average number of emergency room cases was 9369TWe estimate that the average number of emergency room cases has been increasing by 00338 per day other factors held constant This time trend has a tvalue of 3058 and a pvalue00025001HOLIDAYThe average number of emergency room cases is estimated to go up by 1386 on holidays The holiday effect is significant at the 005 level of significanceFRI and SATThe average number of emergency room cases is estimated to go up by 69 and 106 on Fridays and Saturdays respectively These estimated coefficients are both significant at the 001 levelFULLMOONThe average number of emergency room cases is estimated to go up by 245 on days when there is a full moonHowever a null hypothesis stating that a full moon has no influence on the number of emergency room cases would not be rejected at any reasonable level of significanceNEWMOONThe average number of emergency room cases is estimated to go up by 64 on days when there is a new moonHowever a null hypothesis stating that a new moon has no influence on the number of emergency room cases would not be rejected at the usual 10 level or smallerTherefore hospitals should expect more calls on holidays Fridays and Saturdays and also should expect a steady increase over timeb There are very little changes in the remaining coefficients or their standard errors when FULLMOON and NEWMOON are omittedThe equation goodnessoffit statistic decreases slightly as expected when variables are omittedBased on these casual observations the consequences of omitting FULLMOON and NEWMOON are negligible c The null and alternative hypotheses are 0H oris nonzeroH067167 The test statistic is2SSESSERU F2297SSEUSSE 2742419 is the sum of squared errors from the estimated equation withwhere RFULLMOON and NEWMOON omitted and2710882 is the sum of squared errors SSEUfrom the estimated equation with these variables includedThe calculated value of the Fand corresponding pvalue is statistic is 129 The 05 critical value is 3307F09522220277Thus we do not reject the null hypothesis that new and full moons have no impact on the number of emergency room cases
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