Homework 6

October 28, 2013

Rules
You are required to answer all questions in the homework. The deadline for submission is 17:00 on next Monday (04.11.2013) Hand in the assigment to K404: two seperate boxes for ECO and EBE students are placed in front of my oce. E-mails will not be accepted. If you chose to hand-write your homework instead of typing, please make sure that your handwriting is clear and readable. Double check that you write your name/surname and ANR number (the 6 digit one) Failure in fullling any of these will result in a FAIL grade for that homework

Question 1 (4.3)
This question looks at the relationship between the scrap rate and other rm characteristics in nonunionized manufacturing rms. 1) Consider the following model

log (scrap) = 0 + 1 hrsemp + 2 log (sales) + 3 log (employ ) + u Rewrite equation (1) as

(1)

log (scrap) = 0 + 1 hrsemp + 2 log (sales/employ ) + 3 log (employ ) + u Where 3 = 2 + 3

(2)

2) When equation (2) is estimated,

log (scrap) = 11.74 0.042 hrsemp 0.951 log (sales/employ ) + 0.041 log (employ )
(4.57) (0.019) (0.370) (0.205)

The numbers in paranthesis indicate the standard errors for the estimated coecients. hypothesis that a 1% increase in (sales/employ) is associated with a 1% drop in the scrap rate.

Test the

Question 2 (4.7)
Consider the estimated equation from Example 4.3, which can be used to study the eects of skipping class on college GPA:

collegeGP A = 1.39 + 0.412 hsGP A + 0.015 ACT 0.083 skipped

(0.33) (0.094) (0.011) (0.026)

Where N=141, Rsq=0.234 1) Using the standard normal approximation, nd the 95% condence interval for hsGP A . 2) Can you reject the hypothesis H0 : hsGP A = 0.4 against the two sided alternative at the 5% level? 3) Can you reject the hypothesis H0 : hsGP A = 1 against the two sided alternative at the 5% level? 4) Supppose the collegeGPA equation contains heteroskedasticity. What does this mean for the condence interval and the tests you conducted above?