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Econ 390

Spring 2022

Regression Analysis

The purpose of this assignment is to practice your regression analysis and hypothesis testing skills. Note that the codebook describing the variables appears at the end of the assignment sheet.

Please submit the following items:

1) Table of descriptive statistics

2) STATA program code (not output)

3) Written answers to the questions below.


The STATA homepage can be found at www.stata.com. Help for STATA is available within the program. E.g. type ‘help regress’ for help with the regress command.


Tasks:

1) Setting up the data

a) Find the data econ390.dta on the Canvas under STATA Lab module.

b) Using wordpad or any text editor, start writing a .do program file.

c) Read the data into Stata.

d) Create a dummy variable for each region.


2) Descriptive Statistics

a) In Stata, produce some interesting descriptive statistics for the data. Use your judgment for what is interesting.

b) Present these results in a table that effectively conveys the information. This table should not be produced in Stata and should not be raw stata output. Instead, it should be produced in Word or Excel.


3) Regression A

a) Run a regression of RRSP on MTR, AGE, MARD, and the region dummies.

b) What is the estimated coefficient on AGE?

c) Report the p-value for the coefficient on AGE. Is it significantly different from zero at At 5%?

d) Write a sentence interpreting the MTR coefficient. (Hint: use this as a model. e.g. “ . . . a XX increase in the marginal tax rate would lead to a XX change in RRSP contributions.”)

e) Write a sentence interpreting the AGE coefficient. Write another interpreting the MARD coefficient.


4) Regression B

a) Run a regression of RRSP on FAMINC, MTR, AGE, MARD, and the region dummies.

b) What is the coefficient on FAMINC and on MTR? Are they each significant at the 5% level?

c) What happened to the coefficient on MTR in Regression A versus in Regression B?

d) Can you offer an explanation for the change in the MTR coefficient between the two specifications? (Hint: write a couple of sentences.)


5) Regression C

a) Create a variable called RDUM. It should take the value 1 when RRSP>0 and 0 otherwise. This measures ‘participation’.

b) Run an OLS regression of RDUM on FAMINC, MTR, AGE, MARD, and the region dummies.

c) Write a sentence to interpret the coefficient on MTR.


Codebook:

The variables are derived from the 1984 version of the Family Expenditure Survey conducted by Statistics Canada.

Variable

Description

FAMINC

Family income in 1984 dollars.

MARD

Marital status. Takes the value 1 if married or in common-law relationship; 0 otherwise.

AGE

The age of the head of the household.

RRSP

The dollar value of Registered Retirement Savings Plan contributions in 1984, in 1984 dollars.

MTR

Marginal tax rate. The combined (federal/provincial) rate of income tax payable on the last dollar of the head of household’s income.

REGION

Region of residence. Takes the value 1 for Atlantic provinces; 2 for Quebec; 3 for Ontario; 4 for Prairie provinces; 5 for BC.