NAME: hafiz huzaifa anwar

SID: 61723
CLASS ID: 112696
COURSE: ECONOMETRICS (SPRING 2023)

ASSIGNMENT NO.1

QUESTION NO.2:
1. Estimate the regression equation and interpret the out of the regression. Tell which type of
regression is this?
ANS.
EQUATION: food_exp=83.416+10.209(income)
INTERPRETATION: The average food expense is 83.416 and if we increase income by 10.209
then total food expense would be (83.416+10.209) 93.625.
This is simple linear regression because it has one dependent and one independent variable.

2. What is the difference between a log file and a do file. How you decide for any of your project
on which file to create. Explain.
ANS.
A log file is a record of output generated during the execution of a program, while a do file is a
set of instructions used to automate tasks or perform data analysis. The log file provides a
historical record of what happened during program execution, while the do file is used to execute
a series of commands in a structured and reproducible manner.
It depends on the individual whether to create in do file or log file. In a do file there will be a
step by step commands which has to be performed and log file will generate output that what
commands you have given to perform data analysis.

QUESTION NO.3:
1. Explain the only variables used in the above by using the data file.
ANS.
Wage is the dependent variable while ttl_exp, union, south and grade are the independent
variables and ε is the error term.
2. Explain the nature of each variable and attach factorial notation with each variable in your
commands in the following points.
ANS.
Total experience and grade are the metric variables while union and south are the binary
variables. We will write command as follows:
regress wage c.ttl_exp i.union i.south c.grade

3. Draw a conceptual framework of the given econometric model.

ANS.
CONCEPTUAL FRAMEWORK

Ttl_exp

Union Wage

South

Grade

4. Identify the main factor(s) (predictor(s)), explanatory factor(s) and controlling factor(s) in the
model.
ANS.
PREDICTOR: Wage
EXPLANATORY: ttl_exp , union, south, garde
CONTROLLING:

5. Write the command for estimating this regression model with factorial notations.
ANS.
regress wage c.ttl_exp i.union i.south c.grade
11. Tell whether the model is fit or not explaining the criteria for it.
ANS.
Yes, after seeing the regression table we can say that the model is fit because its f-value and p-
value is less than 0.05 and its t-value is greater than 1.96 (both in + and -).

13. Interpret the beta coefficients with signs and significance.

ANS.
INTERPRETATION OF BETA CO.EFFICIENTS:
β1: If total experience increased by 1 unit then wage will increase by 0.266 holding other
variables constant.
β2: If union members increased by 1 unit then wage will increase by 0.822 holding other
variables constant.
β3: If south people increased by 1 unit then wage will decrease by -1.011 holding other variables
constant.
β4: If grade increased by 1 unit then wage will increase by 0.59 holding other variables constant.

14. What are the conclusions based on the results got from estimation.
ANS.
From the results, we can conclude that our overall model is fit because p-value and t-value are
less than 0.05 which means our model is significant. The variation of independent variables is
29% on dependent variable which is explained by the model.