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# ECON2206 (z3389988, z3389750, z3389677

)

ECONOMETRICS PROJECT

Pilar Carnicero Mazón (3389988) Javier Muruzábal Huarte (3389750) Rosalía Rodríguez Bermúdez (3389677)

Introductory Econometrics (ECON2206)

THE UNIVERSITY OF NEW SOUTH WALES

. z3389677) TABLE OF CONTENTS 1.. 11 5..… 5 3.…. MODEL ……………………. DATA …... CONCLUSIONS ……. APPENDIX ……………………. INTRODUCTION …….…………….….…….…………………………………….………………………………………………………. 3 2..ECON2206 (z3389988.……………………..…….… 12 6.……………………………………………………….. 8 4.………………………………….…………………………………………………. 13 2 . z3389750. REFERENCES ………...………………………………………………………………………….

Reed and Harfor present a different and extreme explanation. There are several approaches in the literature that provide this statement some empirical support. we will also consider productivity as an important part of our analysis. a third hypothesis is due to selection into marriage on the basis of wages or personal characteristics that are valued in labor markets (Becker 1981. we have focused in the conclusions presented by Koremnan and Neurark (1991). z3389750. Reed and Harfor (1989) and Cornaglia and Feldman (2010) since they provide good approaches in the explanation of the marriage premium. Greenhalgh 1980). INTRODUCTION Is there marriage premium for professional athletes? Researchers have noticed that married men earn considerably more per hour worked than men who are not currently married. rather than to married workers receiving higher pay than single workers within the 3 . They state that marital status and higher productivity are unrelated so marriage premium simply is due to labor market substitutions by married workers resulting in higher wages. The second one relates this differences to employer favoritism (Hill 1979. Kenny 1983. Bartlett and Callahan 1984). 1985. marriage premiums seem to ascend slowly.ECON2206 (z3389988. There is widespread agreement that cross-sectional marriage differentials for men are considerable. the source of this gap. They affirm that the marriage premium appears due to the location of married workers in higher paying job grades within the company. what makes researchers differ is the reason of this wage premium. However. In our model. Both authors agree that substituting wages for less attractive job characteristics. married workers may also consume less leisure-on-the-job. resulting from quicker wage growth for married men as compared to never-married men. Keeley 1977). Lastly. Before the description and explanation of our own econometric theoretical model. than from an intercept change associated with any particular marital status. working harder than single workers. They conclude that. The first one is based in productivity differentials. Numerous authors have followed Koremnan and Neurark approach since it shown new evidence in this field. In their paper. z3389677) 1. Basing their models on different hypothesis and variables. Some researches states that marriage becomes people more productive (Becker 1981. Nakosteen and Zimmer 1987. it is necessary to discuss some of these results and their implications in order to clarify our ideas regarding the topic.

It could also be interesting to make a brief reference to reverse causality: higher levels of wage imply more opportunities to get married. they find no robust statistically significant effect on productivity when using a variety of productivity measures. which always brings a note of realism to the issue. these researchers confirm the existence of a marriage premium. despite it refers to baseball players. z3389677) same job grades. Despite the interest of all these contributions. They create a model in order to explain and give evidence of their hypothesis. This paper has been really useful for us. However.ECON2206 (z3389988. as the male marital pay premium accounts for about one-third of estimated gender-based wage discrimination in the United States (e. it is simpler and more suitable for our data and our level of knowledge. Based on it. 4 . Besides. it has helped us to understand what can determine marriage premium. Neumark 1988). Korenman (1988) is the only paper that attempts some sort of formal test. however he could find no evidence for it. It is a fascinating field of investigation. Does marriage premium exist? Although there do not appear to be differences in productivity between married and unmarried players. A different view is given by Cornaglia and Feldman in their recent approach “The Marriage Premium Revisited: The Case of Professional Baseball”. Once we have introduced the topic by referencing to the most important literature. We could learn important concepts of econometrics through its application to a sector that is interesting to most people.g. Easy data collection process on various productivity measures and the public nature of their salary makes it easier to check whether these differences are related the to salary. Employers to discriminate in favor of married men as they have usually more stability. our model will be simpler as our data are already given. Cornaglia and Feldman investigate the uncertainty of marriage premium assuming in the model that impacts salary can be due to: Positive causal effect on productivity since one spouse engages in particular actions that influence the productivity of the other spouse. z3389750. employers may discriminate in favor of married players because they lead to greater team success that is not necessarily captured by the productivity measures.. See if the marriage affects the wage involves several fields such as econometrics or statistics but also sociology. we can confirm its importance and interest. Hence.

We don't think they are relevant. 5 . the position of each player on the basketball team (variables guard. as they are always related with the wage. . This is the model we developed: lwage = β0 + β1marr + β2exper + β3coll + β4age + β5points + β6draft + β7allstar + β8children + β9minutes + β10expersq Where. z3389750. & Feldman. and gives detailed information about the points scored. we took experience and age. In order to develop a model that can take into consideration the elements we think we are the most relevant in order to see possible relationships.DTA. this fact is not a disadvantage. forward and central) were not considered to develop our model either. rebounds. 1973). we rejected numerous variables. In the same way.. 2010). and therefore do not suffer discrimination (Scully.lwage is the variable that measures the annual salary in thousands of $. Other variables are more relevant for our study. The fact that the player as been an allstar and the number of points and minutes played on average in each game are important facts that must be taken into account also (Cornaglia. .W. Studies have proven that the more years a person has stayed in a company.. First of all. 1976).E. as they not pose significant effect on the salary for us. We thought that the fact that the players were black or they are married with black people (variables black and marrblack) does not really matter in our case. it is true that being black is a relatively low salary compared to other workers. to be talking about the NBA. G.. z3389677) 2. the American Basketball League. and demographic information such as race. if they are married or not. DATA The main database we use comes from the National Basketball Association (NBA). the more they earn (Lazear. playing time. assists. N.ECON2206 (z3389988. number of children. E. Employers take into account the previous experience and the age of their employees to set the price. which contains information of the professional basketball players that are currently playing in the American National League of Basketball. F. On the other hand.The variable marr means the marital status of the players. The data set is NBASAL. It is true than in a lot of companies. age and wage of the players. a large percentage of players are black.

The variable exper means the years that the subject has played as professional player. The wages vary between 150 and 5749 thousand $. we made some basic descriptive statistics using STATA. .ECON2206 (z3389988.Minutes measures the average of minutes played per year. .The oldest player in the NBA is 41 years old and the youngest is 21 years. we can not specify if there is seasonality or not because the data are per year (we only have annual data).e. z3389750. There is a wide range of salaries among the professional players. z3389677) .Expersq is the square of the years as professional player. with an average age of 27. . .40 (=27. The NBA Draft is a happening that takes place every year in which the teams chooses players who want to join the league. .Allstar means if she has ever been an all star. i.The variable coll are the years played in college. . The way to eliminate this tendency is by using the log of the variable. In our case. no matter how many.The variable age measures the age in years.39405). .Draft means draft number. These players are usually amateur college basketball players. .The variable points measures the points scored per game. We got to the following results: Almost 45% of the NBA players are married (. In order to get some more information. 6 . . just if they have or not.4423792 mean).The children variable means if they have any kids. we observe that there is a decreasing tendency. When analysing variable wage.

118959 27.4423792 1423. is 3. . Dev.193. 717472).3278 5.7741 3.52% of the NBA players have been all stars (. the average number of years in college The average number of minutes played per year is 1682.717472 1682. z3389750.21041 .193 10.21041.72119 Std.828 5. 4975945 999.400062 3.39405 3. The average number of points scored per year is 10.11.4764905 46.391292 . .72 (=3.57% of the NBA players have children (.53702 Min 0 150 1 21 0 33 1.7544096 893. .ECON2206 (z3389988.34.3199085 .1152416 .8 1 1 324 7 .3457249 37. z3389677) Although they are players who didn't play at college.3457249 mean).900667 .2 0 0 1 Max 1 5740 18 41 4 3533 29. Variable marr wage exper age coll minutes points allstar children expersq Obs 269 269 269 269 269 269 269 269 269 269 Mean .1152416 mean).

Err. MODEL After observing data provided. if the person was an ever all star.000 0.095019 .0424675 -.000 [95% Conf.000 0.009 0. -.0122365 -.595 0.0343596 -.0122841 5.0608719 -.0943053 .76 0. Interval] -.0017327 7.0800065 .000 0. age. .0473465 -.2521796 .0026695 .185 0.0021765 .005 0.1279458 -.5340161 -.0071634expersq 8 .0359167 .0075744 -.0000784 .0020428 6.62 6.0071634 6.666 0.0709909 . z3389677) 3.0025991 .82 P>|t| 0.000 0.0367069 .383 0.1997791 .000 0.1666236exper + .0426041marr + .1761987 -.000086 -.2333757 .0079478 .404 0.825439 .62 -1.0069926 5. Err.265935 Looking at the confidence interval we can see that some of the elements chosen are irrelevant explanatory variables that could have negative effects on the other variables of the model.52 -5.0002231 -.637006 Std.318198 lwage = 6. Interval] -. lwage = β0 + β1marr + β2exper + β3coll + β4age + β5points + β6draft + β7allstar + β8children + β9minutes + β₁₀expersq lwage marr exper coll age points draft allstar children minutes expersq _cons Coef. -.ECON2206 (z3389988.0021244 .0611561points -.2389419 .008077 .083163 . such as years played in college.0122525 4.079 0.1666236 .76 48.2350892 .33 0.0837678 .0426041 .0070094 .2002292 .034217 .0873841 -.0159451 -. se started with a basic econometric model that included these variables.115021 .0117598 -. Hence.436 0.0484446 . .54 8.029657 .0165251 -.0700351 .54 -2.8267092 t -0.071818 -. The final model would be: lwage = β0 + β1marr + β2exper + β3points + β4draft + β5expersq lwage marr exper points draft expersq _cons Coef.1379216 -.000 [95% Conf.85 -1.0749656 -.0117598draft - .1250561 t -0. we thought which variables could be relevant for our analysis.53 4.0134554 .43 0.0533948 .87 -2.78 4.0357233 .1430369 . z3389750.84 2.0611561 -.0278891 . if he has children and minutes per season played.006 0.0982775 .071818 Std.55 P>|t| 0.72 -5.0424993 .0000686 -.

96 because it’s the reference value for the ttest at a 95% significant level for ∞ degrees of freedom. 9 .9697 -0.12% for every point scored per game. Points per game have a positive impact on wage because the confidence interval at a 95% significance level goes from 0. 1973).ECON2206 (z3389988.0000 0.. The reason is that the later a player is drafter (that is.094 to 0.047 to 0. because the errors presented in all observations have a constant variance.0989 -0.3033 0.008. Thus.05.95% significance level goes from -0. All the other variables analysed have an effect on wage.5364 1.W.5299 1. G. The variable experience is relevant for the analysis because its confidence interval at a significance level of 95% is from 0. .5868 points draft expersq _cons 1. we conduct a Cook-Weisberg test for heteroskedasticity.1608 -0.1120 -0. We use 1. Correlation matrix of coefficients of regress model: e(V) marr exper points draft expersq _cons marr 1.2167 -0. the worse the player is).1715 -0. For every unit increased in draft number. so 0 is not included and thus we reject the null hypothesis (exper = 0).the p value is greater than 0. creating a system based on incentives. the lower the salary. because if there were heterokedasticity.016 to -0.18%.0000 0. To further support our argument.0 is included in the confidence interval.5303 0.5481 1.0000 0. If it presented heterokedasticity we would have to do a logarithmic transformation to be able to continue working with it.075. and since 0 is not included in the interval we reject the null hypothesis (draft = 0) (Scully. and since 0 is not included in it.t in absolute value is lower than 1.1840 exper 1.96. . Salary increases 6.0669 0. we reject the null hypothesis (points = 0).1677 -0.0000 -0. salary decreases 1. z3389677) Analysing the results we can see that wage is not affected by marriage because: . For a model to be correctly estimated it has to be homocedastic. dgraft number has a negative impact on wage: the larger the draft number.66% for every year of experience. z3389750.24. Draft number is relevant because the confidence interval at a . all values around de diagonal would be 0.0000 -0.0000 Looking at the coefficients of the correlation matrix we can see that there is homocedasticity. the larger the draft number. The player’s salary increases by 16.

365394marr -. Err.6679927 -.60).60 Prob > chi2 = 0.001 0.303023children points marr exper expersq coll children _cons Coef.3374112 . If R squared is 1. you can perfectly predict the value of another term.0241076 .ECON2206 (z3389988. It represents the goodness of fit of a model.15009 Std.2025116 6. years played in college and children.808557 13.792 0.861952 t 0.764609 1.013 0. .0790488 -1.0315804 -.0 then given the value of one term. If R squared is 0.332364 -. we cannot reject the null hypothesis (Ho: Constant variance) and thus the model presents homocedasticity.0790488expersq -1.284418 .45 P>|t| 0. R squared is a statistical term saying how good one term is at predicting another.303023 10.074248 -.090 0. z3389750.70 5. Our adjusted R squared is 0.81632 10 . Since W is smaller.682991 1. z3389677) Breusch-Pagan / Cook-Weisberg test for heteroskedasticity Ho: Constant variance Variables: marr exper points draft expersq chi2(5) = 41. experience. More generally. points = 10.4636924 .161226coll + 1. Yet another way to prove that the homocedasticity of the model is: W = R squared * number of observations = 0.26 3.15009 + .1265173 -2.28 -2.248204 2.000 0. and we perform a regression analysis using the variables that are likely to influence a person’s productivity: marriage.1967665exper -.7535223 .996735 -. we cannot reject the null hypothesis of homocedasticity. We will use points per game as the measure of productivity.0000 Because the probability is less than the critical value (41.50 1.483856 1. Interval] -1. .1992865 1. However.4948.161226 1. since the use of R squared has some drawbacks.000 [95% Conf. One of the reasons why marriage could affect players’ wages is that it might have an influence on the person’s productivity. a higher value of R squared means that you can better predict one term from another.95 -3.0 then knowing one term does not help you know the other term at all.5054 * 240 = 121.296 The chi squared value for 239 degrees of freedom at a 5% significance level is approximately 287.88. we use adjusted R squared that adjusts for the number of explanatory variables.

CONCLUSION We can see that the t-statistic and coefficient level for marriage are low. z3389750. It is surprising to see that the longer a person has played basketball in college. 11 . and it has a high statistical error.ECON2206 (z3389988. After analyzing the various studies conducted by academics in the field. z3389677) 4. This could be due to the fact that the best basketball players never make it to college because they get selected to play professional basketball in high school. Therefore. their results are more interesting and enriching than ours. If we had more knowledge about the subject and had taken more data and assumptions we could have made interesting contrasts and achieved amazing and unexpected results. We can conclude that the effect of marriage on productivity is negligible. we see how they incorporate more variables and assumptions of their models. the lower its productivity (there is a negative relationship).

4. pp.ECON2206 (z3389988.. 1. vol. REFERENCES Cornaglia. pp.". F. pp. Reed. 26.66. Law and Contemporary Problems. 1976. E. vol.. N.. 1991. 2. 237-265 Sanders Korenman. z3389750. 1989. The London School of Economics. "Age.548-558. 12 . The Journal of Human Resources.W. 282-307 Scully. Experience and Wage Growth. Athletics. 2. pp. Lazear. no. 67-84. vol. K. & Feldman. Economic Discrimination in Professional Sports. D. vol. "The marriage premium and compensating wage differentials". "Does Marriage Really Make Men More Productive?"... “The Marriage Premium Revisited: The Case of Professional Baseball”.. 2010. 1973. G.R. no. K. The American Economic Review. Journal of Population Economics. & Harford. no.E. 38. & Neumark. W. z3389677) 5.

APPENDIX sumarize marr exper coll age points draft allstar children minutes expersq histogram wage lwage regress lwage marr exper coll age points draft allstar children minutes expersq regress lwage marr exper points draft expersq vce.ECON2206 (z3389988. z3389677) 6. z3389750. corr regress lwage marr exper points draft expersq hettest marr exper points draft expersq regress points marr exper expersq coll children 13 .