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

Exercise 1

Consider the following model to explain sleeping behavior:

(i) Write down a model that allows the variance of u to differ between men and women. The variance should not depend on other factors.

(ii) Use the data in SLEEP75.RAW to estimate the parameters of the model for heteroskedasticity. (You have to estimate the sleep equation by OLS, first, to obtain the OLS residuals.) Is the estimated variance of u higher for men or for women?

(iii) Is the variance of u statistically different for men and for women?

Step 1 of 4

(i)

The given model is:

It is stated that the variance of the error termshall depend on the gender only

That means,

Consider that

This implies that variance of the error term, in case of women is and the variance of the error term, in case of male is