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

Exercise 15

The data set 401KSUBS.RAW contains information on net financial wealth (nettfa), age of the survey respondent (age), annual family income (inc), family size (fsize), and participation in certain pension plans for people in the United States. The wealth and income variables are both recorded in thousands of dollars. For this question, use only the data for single-person households (so fsize = 1).

(i) How many single-person households are there in the data set?

(ii) Use OLS to estimate the model

and report the results using the usual format. Be sure to use only the single-person households in the sample. Interpret the slope coefficients. Are there any surprises in the slope estimates?

(iii) Does the intercept from the regression in part (ii) have an interesting meaning? Explain.

(iv) Find the p-value for the test H0: ft2 = 1 against H0: ft2<1. Do you reject H0 at the 1% significance level?

(v) If you do a simple regression of nettfa on inc, is the estimated coefficient on inc much different from the estimate in part (ii)? Why or why not?

Step 1 of 11

(i)

In the referred data, the variable f size is used for family size. Single person family is denoted by 1. Import the data in MS-Excel and use filter to obtain the number of single person family. Therefore, there aresingle people in the sample of 9,275.