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

Exercise 7

Use the data in INJURY.RAW for this exercise.

(i) Using the data for Kentucky, reestimate equation, adding as explana¬tory variables male, married, and a full set of industry and injury type dummy variables. How does the estimate on afchnge-highearn change when these other factors are controlled for? Is the estimate still statistically significant?

(ii) What do you make of the small R-squared from part (i)? Does this mean the equation is useless?

(iii) Estimate equation using the data for Michigan. Compare the estimates on the interaction term for Michigan and Kentucky. Is the Michigan estimate statistically significant? What do you make of this?

Step 1 of 3

(i)

Using the data for Kentucky, estimating the regression model by adding,full set of industry and injury type dummy variables , the result is:

The estimate of the coefficient of is 0.191 in the regression model

Whereas, the estimate of the coefficient of is 0.2308 in the regression model on adding explanatory variables such as ,full set of industry and injury type dummy variables

The p-value corresponding to the coefficient of 0.2308 is 0.0009 which is greater than the critical p-value of 0.05 at 5% level of significance, indicating that the coefficient 0.2308 of is statistically significant at 5% level of significance