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  • Tutorial 5 - EIA 2006

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    Chun Ming Lee
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    This document summarizes two models - Model A which has multicollinearity issues due to dummy variable trap, and Model B which is preferable. It also describes a hypothesis test to determine if different seasons impact employment, where the null hypothesis is that seasonal dummies α3, α4, α5 equal 0. Additionally, a wage equation is presented which includes variables for gender, experience, and their interaction to capture different experience effects for males and females.

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    This document summarizes two models - Model A which has multicollinearity issues due to dummy variable trap, and Model B which is preferable. It also describes a hypothesis test to determine if different seasons impact employment, where the null hypothesis is that seasonal dummies α3, α4, α5 equal 0. Additionally, a wage equation is presented which includes variables for gender, experience, and their interaction to capture different experience effects for males and females.

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    4 views1 page

    Tutorial 5 - EIA 2006

    Uploaded by

    Chun Ming Lee
    This document summarizes two models - Model A which has multicollinearity issues due to dummy variable trap, and Model B which is preferable. It also describes a hypothesis test to determine if different seasons impact employment, where the null hypothesis is that seasonal dummies α3, α4, α5 equal 0. Additionally, a wage equation is presented which includes variables for gender, experience, and their interaction to capture different experience effects for males and females.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    EIA 2006 BACIS ECONOMETRICS

    Lee Chun Ming U2003376


    Tutorial 5
    Answer:

    1. a) Model B

    b) Model A has multicollinearity. Dummy variable trap.

    c) 𝐻0 : 𝛼3 = 𝛼4 = 𝛼5 = 0
    𝑅𝑆𝑆𝑢𝑟 𝑅𝑆𝑆
    𝑅𝑆𝑆𝑟 − 𝑅𝑆𝑆𝑟 − 3 𝑢𝑟
    𝑞
    𝐹= =
    𝑅𝑆𝑆𝑢𝑟 𝑅𝑆𝑆𝑢𝑟
    𝑛−𝑘−1 𝑛−5
    If the test statistics is not significance, then we can conclude that different seasons
    in a year will not have effect on the employment.

    𝛼1 + 𝛼2 𝐸𝑋𝑃𝐸𝑅𝑖 + 𝑉𝑖 𝑓𝑒𝑚𝑎𝑙𝑒 = 0
    2. 𝑊𝐴𝐺𝐸 {
    (𝛼1 + 𝛼3 ) + (𝛼2 + 𝛼4 )𝐸𝑋𝑃𝐸𝑅𝑖 + 𝑉𝑖 𝑚𝑎𝑙𝑒 = 1
    𝑊𝐴𝐺𝐸 = 𝛼1 + 𝛼2 𝐸𝑋𝑃𝐸𝑅
    𝑊𝐴𝐺𝐸 = 𝛼1 + 𝛼2 𝐸𝑋𝑃𝐸𝑅 + 𝛼3 𝑀𝐴𝐿𝐸 + 𝛼4 (𝑀𝐴𝐿𝐸𝑥𝐸𝑋𝑃𝐸𝑅)

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