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ECON 2300: INTRODUCTORY ECONOMETRICS

Tutorial 4: Linear Regression with Multiple Regressors, SW Ch6

E6.1 Use the Birthweight Smoking.csv introduced in E5.3 to answer the following questions.

(a) Regress birthweight on smoker.

(b) Regress birthweight on smoker, alcohol, and nprevist.

i. Using the two conditions for omitted variable bias, explain why the exclusion of alcohol and nprevist could lead to omitted variable bias in the regression estimated in (a)

ii. Is the estimated effect of smoking on birth weight substantially different from the regression that excludes alcohol and nprevist? Does the regression in (a) seem to suffer from omitted variable bias?

iii. Jane smoked during her pregnancy, did not drink alcohol, and had 8 prenatal care visits. Use the regression to predict the birth weight of Jane’s child.

iv. Compute R2 and R2 . Why are they so similar?

(c) An alternative way to control for prenatal visits is to use the binary variables tripre0 through tripre3. Regress birthweight on smoker, alcohol, tripre0, tripre2, and tripre3.

i. Why is tripre1 excluded from the regression? What would happen if you included it in the regression?

ii. The estimated coefficient on tripre0 is large and negative. What does this coefficient mea sure? Interpret its value.

iii. Interpret the value of the estimated coefficients on tripre2 and tripre3

iv. Does the regression in (c) explain a larger fraction of the variance in birth weight than the regression in (b)?

E6.2 Using the dataset Growth.csv, but excluding the data for Malta, run a regression of growth on tradeshare.

(a) Construct a table that shows the sample mean, standard deviation, and minimum and maximum values for the series growth, tradeshare, yearsschool, oil, rev coups, assassinations, and rgdp60.

(b) Run a regression of growth on tradeshare, yearsschool, oil, rev coups, assassinations, and rgdp60. Use the regression to predict the average annual growth rate for a country that has average values for all regressors.

(c) Repeat (b) but now assume that the country’s value for tradeshare is one standard deviation above the mean.

(d) Why is oil omitted from the regression? What would happen if it were included?