econometrics

1st Statistical computing assignment.

Directions for turning in: Save your workspace and turn in that file (it should be a .R file).

1. Use the Data in WAGE1 for this exercise:

a. Find the average education level in the sample. What are the highest and lowest years of education?

b. Find the average hourly wage in the sample. Does it seem high or low?

c. The wages are reported in 1976 dollars. Using the internet, find the CPI for the years 1976 and 2013.

d. Use the CPI data from part (c) to find the average hourly wage in 2013 dollars.

e. How many women are in the sample? How many men?

2. Use the WAGE2 data to estimate a simple regression explaining monthly salary (wage) in terms of IQ score (IQ).

a. Find the average salary and IQ in this sample. What is the sample standard deviation of IQ? (IQ scores are standardized so that the average in the population is 100 with a standard deviation of 15.)

b. Estimate a simple regression model where a 1point increase in IQ changes wage by a constant dollar amount. Use this model to find the predicted increase in wage for an increase in IQ of 15 points. Does IQ explain most of the variation in wage?

c. Now estimate a model where each one-point increase in IQ has the same percentage effect (log) on wage. If IQ increases by 15 points, what is the approximate percentage increase in predicted wage?