Final Exam Econometrics

ECO 206-02
Spring 2017 Ashoka University
Take-home STATA Practical SET A
7th May, 2017

Prof. Swagata Bhattacharjee

Instructions.
A. Read the questions carefully. Attempt Both the questions.
B. Explain the answers in a separate word doc. You have to submit the log le and the word doc,
both.
C. Whenever you asked to produce results in "standard" format, use the tabular form found in academic
journals, as discussed in class.
D. You have exactly ONE hour. Submission after 1 pm is considered void.
Good luck!

1
1. A random sample of 753 women were selected and surveyed (MROZ.dta). We are interested in what
determines the womans choice between working and staying at home (which for our purposes is classi
ed as not working). The following variables were collected:

1 if the woman was in labor force

inlf =
0 otherwise
kidslt6 = number of kids under6
educ = education level of woman in years
age = age of woman
nwif einc = other household income (total household income less that of the woman)
exper = work experience of woman in years
exp ersq = experience squared
1 if the woman is urban
city =
0 otherwise

(a) Estimate a Linear Probability model using the last 7 variables and a constant to explain the labor
force decision of the women. Call this model LPM_Full
(b) For each of the following variables indicate whether the variable has a positive or negative eect
on a womans labor force participation and test whether the eect is dierent from zero at the
5% level of signicance (normal tables are attached as well).
1. Kids less than 6
2. Education
3. Non wife income
(c) Check if experience has a non-linear eect of women labor force decision.
(d) Suppose we conjecture that age, education and experience has no bearing on women labor force
decision. Call this model LPM_partial. Check if these restrictions are valid. Clearly state the
Null, the test statistic, the conclusion.
(e) Estimate a third model assuming that all variables except the constant have a zero coe cient.
Call this LPM_Constant. Report the results from three models in the standard format including
signicance of each variable, and standard errors.
(f) Using this last model, derive an expression for the probability that inlf = 1 as a function of the
coe cient on the constant and use the expression to compute the proportion of working women
in the sample. What does this imply about the number of working women in the sample of 753
women?
(g) Perform joint tests of signicance of the variables (except the constant) in the rst two models.

2
. describe

Contains data from F:\EconometricsAshoka17\statafiles\CRIME1.DTA

obs: 2,725
vars: 16 6 Nov 1996 10:54
size: 111,725

storage display value

variable name type format label variable label

narr86 byte %9.0g # times arrested, 1986

nfarr86 byte %9.0g # felony arrests, 1986
nparr86 byte %9.0g # property crme arr., 1986
pcnv float %9.0g proportion of prior convictions
avgsen float %9.0g avg sentence length, mos.
tottime float %9.0g time in prison since 18 (mos.)
ptime86 byte %9.0g mos. in prison during 1986
qemp86 float %9.0g # quarters employed, 1986
inc86 float %9.0g legal income, 1986, $100s
durat float %9.0g recent unemp duration
black byte %9.0g =1 if black
hispan byte %9.0g =1 if Hispanic
born60 byte %9.0g =1 if born in 1960
pcnvsq float %9.0g pcnv^2
pt86sq int %9.0g ptime86^2
inc86sq float %9.0g inc86^2

Figure 1: CRIME1.DTA

2. Consider the dataser CRIME1.DTA to analyze the factors that may lead to an arrest. The dataset is
decribed as follows ( Figure 1):

(a) Create a variable arr86 which is an indicator of whether a male was arrested at least once in 1986.
Consider the linear probability model for arr86. Call this Model 1. Present the results in standard
format.

arr86 = b0 + b1 pcnv + b2 avgsen + b3 tottime + b4 ptime86 + b5 qemp86 + u:

(b) Estimate this model by OLS and verify that all the tted values are strictly between zero and
one. What are the smallest and largest tted values?