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

Exercise 16

Use CRIME4.RAW for this exercise.

(i) Add the logs of each wage variable in the data set and estimate the model by first differencing. How does including these variables affect the coefficients on the criminal justice variables in Example 13.9?

(ii) Do the wage variables in (i) all have the expected sign? Are they jointly significant? Explain.

Step 1 of 3

(i)

There are nine wage variables

On taking the log of these wage variables and incorporating other explanatory variables such as and estimating the first-differenced equation with as the dependent variable with inclusion of the dummy variables , the result is:

On comparing the coefficients of the criminal justice variables in the first-differenced equation with nine wage variables vis-à-vis the first-differenced equation without the nine wage variables, the result is: