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Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge
Edition 6ISBN: 130527010XIntroductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge
Edition 6ISBN: 130527010XIn this exercise, you are to compare OLS and LAD estimates of the effects of 401(k) plan eligibility on net financial assets. The model is
(i) Use the data in 401KSUBS.RAW to estimate the equation by OLS and report the results in the usual form. Interpret the coefficient on e401k.
(ii) Use the OLS residuals to test for heteroskedasticity using the Breusch-Pagan test. Is u independent of the explanatory variables?
(iii) Estimate the equation by LAD and report the results in the same form as for OLS. Interpret the LAD estimate of ?6.
(iv) Reconcile your findings from parts (i) and (iii).
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Estimating the model:
The result is:
The standard form of the model is:
The coefficient of 
is 9.713482. It is interpreted as the net financial assets is $9713.482 higher for the family eligible for 401(K)
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