Econometrics I

Homework #1

Student ID number: ______________________________

Name: ________________________________________

The total is measured on 50

There are eight questions:

You need to answer only seven questions of your choice.

There are partial points (as defined in each question)

Two of the seven questions you answer are considered “bonus” questions.

I want the homework returned to me by beginning of class on the 2nd of December

Copies are either to be handed back to me in class or in the box on my office door (Office DL 305 in the Dante building)

I have attached two tables at the end of this homework. They are the Z-table and T-table. I do not tell you when to use them. You have to decide when it is appropriate to use them. However, you can use “approximate values” (if the value you get is between two values in the table)

Question 1 (10 points): Here is a sample of fictitious countries in a fictitious year. Economists have long argued that reductions in the share of the total labor force employed in agriculture are associated with increases in per capita incomes. Simultaneously, more educated workforces (measured in years of schooling) lead to higher incomes. However, more educated workforces are less likely to be involved in agriculture.

How would you write the regression prediction (i.e. how would you predict the values of real per capita given the variations in employment share in agriculture and average years of schooling?) (5 points)? Are the two independent variables statistically significant from zero at the 5% level (half the points if you show me why by setting up and performing the hypothesis test that their effects on real per capita income are different from zero).

Real Per Capita Income

Employment Share in Agriculture

Average Years of Schooling

6

9

8

8

10

13

8

8

11

7

7

10

7

10

12

12

4

16

9

5

10

8

5

10

9

6

12

10

8

14

10

7

12

11

4

16

9

9

14

10

5

10

11

8

12

Question 2 (10 points): The table below provides you with a sample of variables. There is an independent variable (X), a dependent variable (Y) and the predicted value of that dependent variable (. From this table, with the exception of the estimators themselves, extract two valuable pieces of information that relate to hypothesis testing and three that relates to the goodness of fit, provide them (2 points each)

 

X

Y

 

1.00

1.00

1.16

 

2.00

2.00

1.635

 

3.00

1.30

2.11

 

4.00

3.75

2.585

 

5.00

2.25

3.06

Question 3 (10 points): The table below presents the value of aggregate consumption and disposable income in a fictitious country between 2008 and 2019. Disposable income is defined as the earned income of an individual (i.e. wages, salaries, profits, rents paid, inheritance sums, interest earned, dividends received) after taxes (i.e. including income taxes, consumption taxes etc.) net of transfers (i.e. subsidies to households, in-kind help by governments etc.). If workers become more productive, their disposable incomes go up. If workers enjoy a reduction in their tax rates, their disposable incomes go up. In both cases, they can consume more goods and services. On the aggregate, an increase in disposable income increases consumption in the aggregate. Given the information in table below, if a tax cut of 1M$ was to implemented, what would be the effect on aggregate consumption (half the points)? Is that effect significant (half the points)?

Year

Aggregate Consumption (M$)

Aggregate

Disposable Income

(M$)

2008

102

114

2009

106

118

2010

108

126

2011

110

130

2012

122

136

2013

124

140

2014

128

148

2015

130

156

2016

142

160

2017

148

164

2018

150

170

2019

154

178

Question 4 (10 points): A military official at the department of national defence in Ottawa (Canada’s worst city) attempts to grade the performance of cadets at the Royal Military College in Kingston (Canada’s second worst city). He picks their grades on final exams and gives them a rank of their intelligence quotient (IQ). In the process, he generates this table of value and claims that there is a strong negative correlation between IQ and grades obtained on the final exam. He claims that the correlation coefficient is -0.6031. Is he correct? (2.5 points) Prove your answer! (7.5 points depending on how complete the explanation is).

Grade in points

77

78

65

84

85

88

67

92

68

96

IQ Rank (in ascending order)

10

3

8

5

7

6

9

2

4

1

Question 5 (10 points): You are informed that there were two institutional regimes governing land tenure in Quebec in 1831. One applies to the areas settled before 1791. In those areas, French land tenure laws are being applied. These laws differed from those that were applied in areas settled after 1791. In this second category of areas, British land tenure laws were applied. Using the census of 1831, researchers have extracted a sample of subdistricts across the colony that provided wage rates for daily workers in farming. These are reported in the table below. As can be seen, there is a difference between the mean of the two legal systems that is exceeds half a shilling per day (assuming a 250 days work-year, this is equivalent to the income needed to consume half of what can be deemed the “poverty basket” – i.e. the resources you need to not fall be in a situation of absolute poverty marked by privation and extreme malnutrition). However, is that difference statistically meaningful at the 95% level? Partial points will be allocated for the different steps.

Year

French Law Areas

English Law Areas

Number of districts

170

49

Mean Wage Rage

1.76824432 shillings per day

2.3322789 shillings per day

Standard Deviation

0.4248624 shillings

0.4359043 shillings

Question 6 (10 points): A researcher believes that wages in Lower Canada (modern day Quebec) in 1842 were significantly different than wages in Upper Canada (modern day Ontario) at the same point in time. All he knows is the average wage rate in Upper Canada (2.7 shillings) and he has a sample of wages for 42 districts in Lower Canada in 1842. For the Lower Canada sample, he finds a mean of 2.2 shillings per day of work and a standard deviation of 0.6 shillings. Is there a significant difference between Lower and Upper Canada (partial points allocated for the different steps)?

Question 7 (10 points): For this question, you will have to use excel (I have no doubt). In the table below, monthly wages in farming in different areas of Lower Canada in 1831 are taken to be a function of the share of the conceded land that has been improved (cleared land) for farming and the recency of settlement (how many years have elapsed since the year of the first settlement). What is the effect of cleared land on monthly wages (5 points)? Is the effect statistically significant at the 95% level, provide the t-value for the estimator of cleared land (5 points)?

District

Sub-District

Monthly Wages (Shilling)

Cleared land (Share

of conceded estate)

Years since 1st settlement

PORTNEUF

Deschambaults

35.5

0.37

118

PORTNEUF

Cap Santé

23.75

0.33

152

QUEBEC

Rivière St-Charles

25

0.61

156

QUEBEC

St-Ambroise

50

0.37

155

RICHELIEU

St-Ours

15

0.46

159

RICHELIEU

St-Denis

15

0.53

137

ROUVILLE

Foucault

20

0.46

98

ROUVILLE

Sabrevois

45

0.15

14

SHERBROOKE

Compton

45

0.33

29

SHERBROOKE

Dudswell

60

0.21

26

SHERBROOKE

Shipton

50

0.29

30

SHERBROOKE

Windsor

50

0.26

29

STANSTEAD

Barnston

50

0.28

30

STANSTEAD

Barford

45

0.05

29

TERREBONNE

St-Martin

20

0.61

57

TERREBONNE

Ste-Rose

20

0.67

86

VAUDREUIL

Rigaud

37.5

0.62

29

YAMASKA

Baie St-Antoine

22.5

0.46

109

Question 8: A dataset contains data on birth to women in Canada. A researcher is concerned with the possibility that the behavior of mothers during pregnancy significantly affect the health of infants. The researcher is particularly concerned with the birthweight of infants (in grams) (bwght) and the effect of the number of cigarettes smoked per day (cigs). He estimates the following regression using a sample of 1,388 births:

What is the effect of smoking zero cigarettes (2 point)? What is the effect of smoking 20 cigarettes per day (3 points)? If you are told that cigarette consumption is strongly correlated with alcohol consumption (the two being substitutes) and that the adverse health effects on infants from alcohol consumption are more worrisome, how do you expect the coefficient for cigs to be altered (5 points)?

Z-TABLE

T-TABLE

Deliverable 03 Worksheet

1. Discuss the importance of constructing confidence intervals for the population mean by answering these questions.

· What are confidence intervals?

· What is a point estimate?

· What is the best point estimate for the population mean? Explain.

· Why do we need confidence intervals?

Answer and Explanation:

Enter your step-by-step answer and explanations here.

2. Using the data from the Excel workbook, construct a  95%  confidence interval for the population mean. Assume that your data is normally distributed and σ is unknown. Include a statement that correctly interprets the confidence interval in context of the scenario.

Hint: Use the sample mean and sample standard deviation from Deliverable 1.

Answer and Explanation:

Enter your step-by-step answer and explanations here.

3. Using the data from the Excel workbook, construct a  99%  confidence interval for the population mean. Assume that your data is normally distributed and σ is unknown. Include a statement that correctly interprets the confidence interval in context of the scenario.

Hint: Use the sample mean and sample standard deviation from Deliverable 1.

Answer and Explanation:

Enter your step-by-step answer and explanations here.

4. Compare your answers for (2) and (3). You notice that the 99% confidence interval is wider. What is the advantage of using a wider confidence interval? Why would you not always use the 99% confidence interval? Explain with an example.

Answer and Explanation:

Enter your step-by-step answer and explanations here.

5. We want to estimate the mean salary in Minnesota. How many jobs must be randomly selected for their respective mean salaries if we want 95% confidence that the sample mean is within $126 of the population mean and σ = $1150.

Is the current sample size of 364 in the data set in our Excel workbook large enough? Explain.

Answer and Explanation:

Enter your step-by-step answer and explanations here.

Data

Job Title Salary
Accountants and Auditors 70500 source: http://www.bls.gov/
Actuaries 102880
Administrative Law Judges, Adjudicators, and Hearing Officers 117190
Administrative Services Managers 96180
Adult Basic and Secondary Education and Literacy Teachers and Instructors 63940
Advertising and Promotions Managers 104130
Advertising Sales Agents 51740
Aerospace Engineering and Operations Technicians 56140
Aerospace Engineers 115220
Agents and Business Managers of Artists, Performers, and Athletes 74580
Agricultural and Food Science Technicians 42060
Agricultural Inspectors 54140
Agricultural Sciences Teachers, Postsecondary 87390
Air Traffic Controllers 124540
Aircraft Cargo Handling Supervisors 52480
Aircraft Structure, Surfaces, Rigging, and Systems Assemblers 51410
Airfield Operations Specialists 59800
Airline Pilots, Copilots, and Flight Engineers 115670
Anthropologists and Archeologists 57720
Appraisers and Assessors of Real Estate 52870
Arbitrators, Mediators, and Conciliators 86430
Architects, Except Landscape and Naval 81000
Architectural and Civil Drafters 62210
Architecture and Engineering Occupations 73850
Architecture Teachers, Postsecondary 73870
Archivists 60730
Art Directors 92680
Art, Drama, and Music Teachers, Postsecondary 78700
Athletic Trainers 45440
Atmospheric and Space Scientists 93900
Atmospheric, Earth, Marine, and Space Sciences Teachers, Postsecondary 96590
Audiologists 97230
Avionics Technicians 47320
Biomedical Engineers 99000
Boilermakers 76310
Broadcast News Analysts 71040
Brokerage Clerks 57260
Budget Analysts 75940
Business and Financial Operations Occupations 64880
Business Operations Specialists, All Other 67980
Business Teachers, Postsecondary 119810
Buyers and Purchasing Agents, Farm Products 62290
Camera and Photographic Equipment Repairers 32280
Captains, Mates, and Pilots of Water Vessels 63890
Cardiovascular Technologists and Technicians 59630
Career/Technical Education Teachers, Middle School 69050
Career/Technical Education Teachers, Secondary School 63430
Cargo and Freight Agents 40910
Cartographers and Photogrammetrists 72120
Chefs and Head Cooks 47660
Chemical Engineers 87200
Chemical Equipment Operators and Tenders 45460
Chemical Plant and System Operators 54920
Chemical Technicians 50360
Chemistry Teachers, Postsecondary 96330
Chemists 76620
Child, Family, and School Social Workers 58140
Chiropractors 86820
Civil Engineers 91430
Claims Adjusters, Examiners, and Investigators 66030
Clinical, Counseling, and School Psychologists 76150
Coil Winders, Tapers, and Finishers 36610
Commercial and Industrial Designers 66710
Commercial Pilots 104420
Communications Equipment Operators, All Other 43160
Communications Teachers, Postsecondary 85310
Community and Social Service Occupations 43790
Community Health Workers 37190
Compensation and Benefits Managers 121570
Compensation, Benefits, and Job Analysis Specialists 67210
Compliance Officers 71780
Computer and Information Research Scientists 121310
Computer and Information Systems Managers 137140
Computer and Mathematical Occupations 81640
Computer Hardware Engineers 95500
Computer Network Architects 112050
Computer Network Support Specialists 70940
Computer Occupations, All Other 92960
Computer Programmers 84280
Computer Science Teachers, Postsecondary 89290
Computer Systems Analysts 90600
Computer User Support Specialists 53680
Conservation Scientists 67540
Construction and Building Inspectors 64150
Construction Managers 99150
Continuous Mining Machine Operators 55330
Control and Valve Installers and Repairers, Except Mechanical Door 64960
Conveyor Operators and Tenders 35110
Cost Estimators 69480
Crane and Tower Operators 53980
Credit Analysts 72870
Credit Counselors 46720
Criminal Justice and Law Enforcement Teachers, Postsecondary 66980
Curators 66230
Database Administrators 91730
Dental Hygienists 71930
Derrick Operators, Oil and Gas 38120
Detectives and Criminal Investigators 90890
Diagnostic Medical Sonographers 74340
Dietitians and Nutritionists 60370
Directors, Religious Activities and Education 43690
Drafters, All Other 51790
Economics Teachers, Postsecondary 137920
Economists 106280
Editors 58820
Education Administrators, All Other 79960
Education Administrators, Elementary and Secondary School 103570
Education Administrators, Postsecondary 110110
Education Administrators, Preschool and Childcare Center/Program 65860
Education Teachers, Postsecondary 65020
Education, Training, and Library Occupations 47920
Educational, Guidance, School, and Vocational Counselors 56550
Electric Motor, Power Tool, and Related Repairers 63800
Electrical and Electronics Drafters 69010
Electrical and Electronics Engineering Technicians 68060
Electrical and Electronics Installers and Repairers, Transportation Equipment 54060
Electrical and Electronics Repairers, Commercial and Industrial Equipment 55970
Electrical and Electronics Repairers, Powerhouse, Substation, and Relay 81590
Electrical Engineers 91870
Electrical Power-Line Installers and Repairers 67430
Electricians 74010
Electro-Mechanical Technicians 54700
Electronics Engineers, Except Computer 100610
Elementary School Teachers, Except Special Education 62620
Elevator Installers and Repairers 88340
Embalmers 48770
Emergency Management Directors 79270
Engineering Technicians, Except Drafters, All Other 63250
English Language and Literature Teachers, Postsecondary 81700
Environmental Engineering Technicians 56810
Environmental Engineers 84870
Environmental Science and Protection Technicians, Including Health 45090
Environmental Science Teachers, Postsecondary 92530
Environmental Scientists and Specialists, Including Health 84320
Epidemiologists 85620
Executive Secretaries and Executive Administrative Assistants 55770
Exercise Physiologists 54300
Explosives Workers, Ordnance Handling Experts, and Blasters 62910
Extruding, Forming, Pressing, and Compacting Machine Setters, Operators, and Tenders 38680
Farm and Home Management Advisors 38940
Film and Video Editors 62280
Financial Analysts 85660
Financial Clerks, All Other 44080
Financial Examiners 99800
Financial Managers 134370
Financial Specialists, All Other 87690
Fire Inspectors and Investigators 58590
Firefighters 49620
First-Line Supervisors of Construction Trades and Extraction Workers 82160
First-Line Supervisors of Correctional Officers 84290
First-Line Supervisors of Farming, Fishing, and Forestry Workers 42540
First-Line Supervisors of Fire Fighting and Prevention Workers 91930
First-Line Supervisors of Helpers, Laborers, and Material Movers, Hand 49590
First-Line Supervisors of Landscaping, Lawn Service, and Groundskeeping Workers 54280
First-Line Supervisors of Mechanics, Installers, and Repairers 66430
First-Line Supervisors of Non-Retail Sales Workers 72920
First-Line Supervisors of Office and Administrative Support Workers 58120
First-Line Supervisors of Police and Detectives 101240
First-Line Supervisors of Production and Operating Workers 60990
First-Line Supervisors of Protective Service Workers, All Other 46280
First-Line Supervisors of Transportation and Material-Moving Machine and Vehicle Operators 58250
Fish and Game Wardens 88120
Food Service Managers 51340
Foreign Language and Literature Teachers, Postsecondary 73350
Forensic Science Technicians 79630
Forest and Conservation Technicians 46640
Foresters 65970
Forestry and Conservation Science Teachers, Postsecondary 90080
Fundraisers 57720
Funeral Service Managers 82590
Gaming Supervisors 32220
Gas Compressor and Gas Pumping Station Operators 62720
Gas Plant Operators 70130
General and Operations Managers 124190
Geography Teachers, Postsecondary 82530
Geological and Petroleum Technicians 39180
Geoscientists, Except Hydrologists and Geographers 70730
Health and Safety Engineers, Except Mining Safety Engineers and Inspectors 84880
Health Diagnosing and Treating Practitioners, All Other 67650
Health Educators 58050
Health Specialties Teachers, Postsecondary 136670
Health Technologists and Technicians, All Other 45940
Healthcare Practitioners and Technical Occupations 67470
Healthcare Social Workers 53600
Hearing Aid Specialists 46970
Historians 70840
History Teachers, Postsecondary 88590
Hoist and Winch Operators 80,660
Home Economics Teachers, Postsecondary 74490
Human Resources Managers 112430
Human Resources Specialists 61460
Industrial Engineering Technicians 55460
Industrial Engineers 82720
Industrial Machinery Mechanics 55930
Industrial Production Managers 100480
Information and Record Clerks, All Other 45700
Information Security Analysts 97360
Installation, Maintenance, and Repair Occupations 45990
Instructional Coordinators 66810
Insurance Appraisers, Auto Damage 70380
Insurance Sales Agents 66080
Insurance Underwriters 76990
Interior Designers 62010
Judges, Magistrate Judges, and Magistrates 58140
Kindergarten Teachers, Except Special Education 55850
Labor Relations Specialists 51870
Landscape Architects 68960
Lawyers 140920
Layout Workers, Metal and Plastic 42830
Legal Occupations 82900
Legal Support Workers, All Other 59800
Librarians 56320
Library Science Teachers, Postsecondary 78830
Life Scientists, All Other 82630
Life, Physical, and Social Science Occupations 62840
Loading Machine Operators, Underground Mining 41270
Loan Officers 63040
Locomotive Engineers 71960
Logging Workers, All Other 41940
Logisticians 74600
Magnetic Resonance Imaging Technologists 70580
Management Analysts 92200
Managers, All Other 88600
Marine Engineers and Naval Architects 82410
Market Research Analysts and Marketing Specialists 62380
Marketing Managers 122260
Marriage and Family Therapists 55600
Materials Engineers 91510
Mathematical Science Teachers, Postsecondary 78880
Mechanical Drafters 58540
Mechanical Engineering Technicians 60220
Mechanical Engineers 92040
Media and Communication Equipment Workers, All Other 76540
Medical and Clinical Laboratory Technologists 65770
Medical and Health Services Managers 113030
Medical Equipment Repairers 58310
Meeting, Convention, and Event Planners 52370
Mental Health Counselors 46580
Metal-Refining Furnace Operators and Tenders 44990
Middle School Teachers, Except Special and Career/Technical Education 66630
Millwrights 58660
Mine Cutting and Channeling Machine Operators 46250
Mine Shuttle Car Operators 56930
Mining and Geological Engineers, Including Mining Safety Engineers 93920
Mining Machine Operators, All Other 69160
Mixing and Blending Machine Setters, Operators, and Tenders 41970
Mobile Heavy Equipment Mechanics, Except Engines 58950
Model Makers, Metal and Plastic 57100
Morticians, Undertakers, and Funeral Directors 69800
Multimedia Artists and Animators 59890
Music Directors and Composers 46260
Natural Sciences Managers 113620
Network and Computer Systems Administrators 87700
Nuclear Engineers 121650
Nuclear Medicine Technologists 79440
Nuclear Technicians 88770
Nurse Practitioners 101960
Nursing Instructors and Teachers, Postsecondary 72450
Occupational Health and Safety Specialists 75610
Occupational Health and Safety Technicians 61740
Occupational Therapists 82290
Occupational Therapy Assistants 61860
Operations Research Analysts 90310
Optometrists 111790
Orthotists and Prosthetists 82380
Painters, Transportation Equipment 45230
Paper Goods Machine Setters, Operators, and Tenders 37110
Paralegals and Legal Assistants 56990
Patternmakers, Metal and Plastic 56260
Personal Financial Advisors 121750
Petroleum Pump System Operators, Refinery Operators, and Gaugers 66550
Pharmacists 120280
Philosophy and Religion Teachers, Postsecondary 78010
Physical Therapist Assistants 57750
Physical Therapists 90040
Physician Assistants 104730
Physicists 118520
Physics Teachers, Postsecondary 89040
Plant and System Operators, All Other 56830
Plumbers, Pipefitters, and Steamfitters 77570
Podiatrists 192180
Police and Sheriff's Patrol Officers 73870
Political Science Teachers, Postsecondary 90250
Postal Service Clerks 49310
Postal Service Mail Carriers 50160
Postal Service Mail Sorters, Processors, and Processing Machine Operators 49820
Postmasters and Mail Superintendents 75620
Power Distributors and Dispatchers 84830
Power Plant Operators 79100
Precision Instrument and Equipment Repairers, All Other 64170
Private Detectives and Investigators 58290
Probation Officers and Correctional Treatment Specialists 64300
Producers and Directors 75970
Production, Planning, and Expediting Clerks 48390
Property, Real Estate, and Community Association Managers 66710
Psychologists, All Other 79010
Psychology Teachers, Postsecondary 89680
Public Relations and Fundraising Managers 115180
Public Relations Specialists 63620
Pump Operators, Except Wellhead Pumpers 51520
Purchasing Agents, Except Wholesale, Retail, and Farm Products 61760
Purchasing Managers 111380
Radiation Therapists 84640
Radio, Cellular, and Tower Equipment Installers and Repairers 49240
Radiologic Technologists 63100
Rail Yard Engineers, Dinkey Operators, and Hostlers 54790
Railroad Conductors and Yardmasters 65740
Rail-Track Laying and Maintenance Equipment Operators 54600
Real Estate Brokers 86260
Real Estate Sales Agents 59010
Recreation and Fitness Studies Teachers, Postsecondary 60080
Recreational Vehicle Service Technicians 34450
Refractory Materials Repairers, Except Brickmasons 49210
Registered Nurses 71730
Reinforcing Iron and Rebar Workers 86290
Respiratory Therapists 56910
Rolling Machine Setters, Operators, and Tenders, Metal and Plastic 38060
Roof Bolters, Mining 58900
Rotary Drill Operators, Oil and Gas 49720
Sales Engineers 98760
Sales Managers 128340
Sales Representatives, Services, All Other 61930
Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products 69900
Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products 81950
Secondary School Teachers, Except Special and Career/Technical Education 68380
Securities, Commodities, and Financial Services Sales Agents 86070
Service Unit Operators, Oil, Gas, and Mining 42200
Set and Exhibit Designers 54620
Ship Engineers 69300
Signal and Track Switch Repairers 37720
Social and Community Service Managers 63870
Social Scientists and Related Workers, All Other 79960
Social Work Teachers, Postsecondary 54580
Social Workers, All Other 65890
Sociology Teachers, Postsecondary 87710
Software Developers, Applications 96110
Software Developers, Systems Software 106700
Soil and Plant Scientists 57080
Sound Engineering Technicians 58660
Special Education Teachers, All Other 59400
Special Education Teachers, Kindergarten and Elementary School 65430
Special Education Teachers, Middle School 62160
Special Education Teachers, Secondary School 68560
Speech-Language Pathologists 78760
Stationary Engineers and Boiler Operators 79090
Statisticians 88190
Surveyors 62580
Tank Car, Truck, and Ship Loaders 45470
Tax Examiners and Collectors, and Revenue Agents 79850
Technical Writers 67410
Telecommunications Equipment Installers and Repairers, Except Line Installers 57580
Tire Builders 42500
Tool and Die Makers 54680
Training and Development Managers 101500
Training and Development Specialists 59910
Transportation Inspectors 86790
Transportation, Storage, and Distribution Managers 92220
Urban and Regional Planners 79510
Veterinarians 93830
Water and Wastewater Treatment Plant and System Operators 54560
Web Developers 69430
Wholesale and Retail Buyers, Except Farm Products 59080
Writers and Authors 62170
Zoologists and Wildlife Biologists 63420

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