MLR

Question 1

Level level form

Answer 1

if educ is increased by 1 yeear, wages is expected to increase by 1025

Question 2

solve for marginal effect of level level form

Answer 2

(solve)

Question 3

Log Log form

Answer 3

• elasticity
• corresponding increase of Y for 1% increase on X
• if X goes up by 1%, wages is expected to increase by 3.3%

Question 4

solve for log log form

Answer 4

(solve)

Question 5

Log Level form

Answer 5

• dep var is in log form, ind var is in level form
• if educ is increased by 1 year, Wages is expected to increase by 33%

Question 6

solve for log level form

Answer 6

(solve)

Question 8

Level log form

Answer 8

• dep var is in level form, ind var is in log form
• if educ is inreased by 1%, wages is expected to increase by $40.25

Question 9

solve for level log form

Answer 9

(sol’n)

Question 10

MEASURING SKEWNESS
interpret:

a3 = 0
a3 > 0
a3 < 0

Answer 10

a3 = 0
- equal to the sum of deviations

a3 > 0
- greater than the sum of deviations
(dispersed Above Mean)

a3 < 0
- less than the sum of deviations
(dispersed Below mean)

Question 11

Binary Dep Var

Answer 11

• dep var is restrcited to 0 or 1

Question 12

Linear Probability Model

Answer 12

the response is linear in parameters

Question 13

Example LPM

Answer 13

labor force participation decision by married women

– Dep var in inlf

inlf = 1 when in labor force
inlf = 0 when not in labor force

(sol’n)

Interpretation:
- another year of education increases the probability of labor force participation by 0.034

• having one additional child less than 6 years old reduces prob part. by 0.278

Question 14

General Interaction Terms

Answer 14

• captures the change in the marginal effect of X on Y due to a one unit change in a second independent variable Zi
• where Z is a continuous variable