Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 13

Use the data in MEAP93.RAW to answer this question.

(i) Estimate the model

math10 = ?0 + ?1 log(expend) + ?2lnchprg + u,

and report the results in the usual form, including the sample size and R-squared. Are the signs of the slope coefficients what you expected? Explain.

(ii) What do you make of the intercept you estimated in part (i)? In particular, does it make sense to set the two explanatory variables to zero? [Hint: Recall that log(1)=0.]

(iii) Now run the simple regression of mathlO on log(expend), and compare the slope coefficient with the estimate obtained in part (i). Is the estimated spending effect now larger or smaller than in part (i)?

(iv) Find the correlation between lexpend = log(expend) and lnchprg. Does its sign make sense to you?

(v) Use part (iv) to explain your findings in part (iii).

Step 1 of 9

2. The below dialog box opens. Enter the required variables corresponding to “Response” and “Predictors” headings. The updated dialog box is shown below: