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

Exercise 6

In Problem of Chapter 3, we estimated an equation to test for a tradeoff between minutes per week spent sleeping (sleep) and minutes per week spent working (totwrk) for a random sample of individuals. We also included education and age in the equation. Because sleep and totwrk are jointly chosen by each individual, is the estimated tradeoff between sleeping and working subject to a "simultaneity bias" criticism? Explain.

The following model is a simplified version of the multiple regression model used by Biddle and Hamermesh (1990) to study the tradeoff between time spent sleeping and working and to look at other factors affecting sleep:

sleep ?0+ ?1totwrk ?2educ+ ?3age u, where sleep and totwrk (total work) are measured in minutes per week and educ and age are measured in years. (See also Computer Exercise C2.3.)

(i) If adults trade off sleep for work, what is the sign of ?1?

(ii) What signs do you think ?2 and ?3 will have?

(iii) Using the data in SLEEP75.RAW, the estimated equation is

If someone works five more hours per week, by how many minutes is sleep predicted to fall? Is this a large tradeoff?

(iv) Discuss the sign and magnitude of the estimated coefficient on educ.

(v) Would you say totwrk, educ, and age explain much of the variation in sleep? What other factors might affect the time spent sleeping? Are these likely to be correlated with totwrk?

Step 1 of 6

The equation that represents the tradeoff between minutes per week spent sleepingand minutes per week spent workingfor a random sample of individuals including education and age is given by:

Despite and are jointly chosen by each individual, there would not be “simultaneity bias” in this case as the question of the interest is the tradeoff between minutes per week spent sleepingand minutes per week spent workingfor a random sample of individuals, keeping other factors fixed.

Here, andare measured in minutes per week and educ and age are measured in years.