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

Exercise 19

Use the data in BWGHT2.RAW for this exercise.

(i) Estimate the equation

log(bwght) = ????0 + ????1npvis + ????2npvis2 + u by OLS, and report the results in the usual way. Is the quadratic term significant?

(ii) Show that, based on the equation from part (i), the number of prenatal visits that maximizes log(bwght) is estimated to be about 22. How many women had at least 22 prenatal visits in the sample?

(iii) Does it make sense that birth weight is actually predicted to decline after 22 prenatal visits? Explain.

(iv) Add mother’s age to the equation, using a quadratic functional form. Holding npvis fixed, at what mother’s age is the birth weight of the child maximized? What fraction of women in the sample are older than the “optimal” age?

(v) Would you say that mother’s age and number of prenatal visits explain a lot of the variation in log(bwght)?

(vi) Using quadratics for both npvis and age, decide whether using the natural log or the level of bwght is better for predicting bwght.

Step 1 of 6

(i)

The estimated equation comes out to be:

The quadratic term is very significant; its t statistic is above 3.5 in absolute value.