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Use the following basic commands in this data file (i) (ii) egen tag – count the number of villages in the sample bysort egen mean – define a variable that gives you the average owned land in each village twoway function/ menu graphics – Use stata to plot a graph of y = x2 for x = (-5,5) display – Use stata to compute the value of log(5) × sin(4)2 lowess – fit a curve for the relationship between education and age of the household head. Do you find something strange? Look at the education variable again and remedy the situation.

(iii)

(iv) (v)

Q2. Use the data in WAGE2.RAW to estimate a simple regression explaining monthly salary (wage) in terms of IQ score (IQ). (i) Find the average salary and average IQ in the sample. What is the sample standard deviation of IQ? (IQ scores are standardized so that the average in the population is 100 with a standard deviation equal to 15.) (ii)

Report the average level of education of (a) black married females (b) black married males (c) white unmarried males and (d) white married females, in your data.

(iii)

Estimate a simple regression model where a one-point increase in IQ changes wage by a constant dollar amount. Use this model to find the predicted increase in wage for an increase in IQ of 15 point. Does IQ explain most of the variation in wage? Interpret the intercept of the equation and plot the regression line along with the scatter plot of original data. What could be the possible excluded variables in this model that compose the error term? Now, estimate a model where each one-point increase in IQ has the same percentage effect on wage. If IQ increases by 15 points, what is the approximate percentage increase in predicted wage?

(iv)

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