Applied Econometrics and Economic Modelling

Study Block

Assignment 3

To, Prof. Steve Clark

Submitted by: Rudri Trivedi

2023 v Praz
Data for this question comes from appropriate spreadsheet with the excel file
Finance Accounting Two Spreadsheets

1) Test that the salaries of Finance and Accounting majors are the same using the regression
method using dummy a variable. Justify your answer. Use a significance level of 0.05.

Obs Salary Acc1Fin0 Ei (little y1i) Ei^2

1 28.8 1 1.5 2.25
2 25.3 1 -2 4
3 26.2 1 -1.1 1.21
4 27.9 1 0.6 0.36
5 27 1 -0.3 0.09
6 26.2 1 -1.1 1.21
7 28.1 1 0.8 0.64
8 24.7 1 -2.6 6.76
9 25.2 1 -2.1 4.41
10 29.2 1 1.9 3.61
11 29.7 1 2.4 5.76
12 29.3 1 2 4
13 26.3 0 0.69167 0.478407
14 23.6 0 -2.00833 4.033389
15 25 0 -0.60833 0.370065
16 23 0 -2.60833 6.803385
17 27.9 0 2.29167 5.251751
18 24.5 0 -1.10833 1.228395
19 29 0 3.39167 11.50343
20 27.4 0 1.79167 3.210081
21 23.5 0 -2.10833 4.445055
22 26.9 0 1.29167 1.668411
23 26.2 0 0.59167 0.350073
24 24 0 -1.60833 2.586725

Sum 634.9 12 4E-05 76.22917

Average 26.45417 0.5

xpx 24 12
12 12

Det xpx 144

Ai 0.083333 -0.08333
 -0.08333 0.166667

xpy 634.9
327.6

B0 25.60833
B1 1.691667

Mean Acc 27.3

S2 3.464962

c 0.166667 VAR B1 0.577494

SE 0.75993

tb1 2.226082

Test that the salaries of Finance and Accounting majors

H0=B0=0 (Salary of finance majors)
H0=B1=0 (Salary of accounting majors)
Therefore, B0=B1 (Salary of finance major=Salary of accounting major).
In the above model it can be seen that B0=B1≠0. Thus, we reject the null hypothesis.
2) Redo question 2) using means test option in GRETL.
Test that the salaries of Finance and Accounting majors
H0=B0=0 (Salary of finance majors)
H0=B1=0 (Salary of accounting majors)
Therefore, B0=B1 (Salary of finance major=Salary of accounting major).
In the above model it can be seen that B0=B1≠0. Thus, we reject the null hypothesis.