econometrics

Econ 390-03

Assignment 14

Due date is Sunday, Nov 29th 11:59 PM. Late submissions are not accepted.

Note I am aware the first half of this assignment is similar to assignment 13, but I want you to compare the cubic specification with a linear log specification.

1. Open the data “ch8_cps” on Rstudio

2. How many variable, number of observations, and dummy variables do we have?

3. Run a regression of ahe on age, what is the model and what is the predicted equation

4. What is the effect of age on ahe?

5. Provide the scatter plot and the fitted regression line.

6. Run a non-linear cubic regression of ahe on age (meaning run ahe on age, age squared, and age cubic.)

7. Write down the model and the predicted equation for part 6.

8. Looking at the significance of the cubic term in regression part 6, do you prefer this model (cubic) or would you go with a quadratic model? Or even a linear model?

9. In part 6 what is the effect of age on ahe? is it easy to read? (No)

10. Provide/add the fitted curve of regression part 6 on the scatter plot (you did in part 5).

11. Run a regression of ahe on log(age)

12. What is the effect of age on ahe in this model 11? Easy to read? (yes )

13. Provide/add the fitted curve of regression part 11 on the scatter plot (you did in part 5 and 10).

14. Write down the model and predicted equation for part 11.

15. What is Rsquared in regression in part3, regression in part6 and regression in part 11?