Practical Exercise 2

Names of the participants:

1)
2)
3)

This exercise is based on a sample of 709 Italian establishments of firms operating in

2019. The data proceed from the World Bank Enterprise Survey:
https://microdata.worldbank.org/index.php/catalog/enterprise_surveys/about
The aim of this exercise consists in extending the analysis carried out in the second
practical exercise to explain firm’s sales (over 10000€) as a function of the age of the
firm (i.e. number of years since the beginning of operations) and the experience of the
manager in the same sector, by the inclusion in of two additional categorical variables
in the regression model:
a) A dummy that indicates whether the manager is female (manager_female).
b) A categorical variable indicating the sector in which the firm operates, coded
as: 1) Food, 2) Fabricated Metal Products, 3) Machinery & Equipment, 4) Other
Manufacturing, 5) Retail, 6) Other Services.
Follow the list of instructions and report the results in the Word document:
1) Start from the model that explains the log of sales (over 10000€), as a function
of firm’s age (and its square) and manager’s experience and its square, and add
the dummy that captures manager’s gender. Analyse the coefficient of this
additional variable (significance and eventually the effect on the outcome).

2) In order to consider whether the effect of manager’s experience on sales

depends on her/his gender, generate the interactions between manager’s
gender and experience and experience squared and include these two
additional variable in the regression model. Interpret the corresponding results,
highlighting whether the impact of each additional year of experience is the
same or not according to manager’s gender.

3) Provide the descriptive statistics of the variable capturing firms’ sector, using a
bar chart, and explain the distribution of firms across sectors. Also, provide the
average sales by sector and comment the results.

4) Include the sector’s dummies in the regression model estimated in point 2,

using the food industry as reference category. Interpret the results obtained
from this new model, also commenting the changes observed in the estimated

1
 coefficients for other explanatory variables that are produced after taking into
account the industry in which the firm operates.

5) Comment whether the inclusion of dummies for sector is justified from a

statistical point of view and test the null hypothesis that all the sectoral
dummies’ coefficients are jointly equal to zero, explaining the results.

6) Using a Chow test, analyse whether the effect of all the explanatory variables
included in the regression model is different according to manager’s gender
(hint: you have to start from a model without manager’s gender but all the
other variables and apply the Chow test).

Deliver the exercise through the Campus Virtual before the deadline (April 12 th at
23:59), provided that you have included your names on the top of the document.