a. Explain the difference between the two models. b. Explain why one needs to estimate the second model. c. Test the hypothesis that the second model is more appropriate than the first model using the Chow Test.
6. (6 pts) Suppose you estimated the following two models. 29.09 29.09 29.09 hgcmom hgcdad *aqo Eemale black hispanic marr_par educatn age income In income exper exper_5 male loat float float float float float float float 29.09 highest grd compltd by mom highest gud compltd by dad armed forces qual test score 1 is individ is a female 1 i individ is AfricanAmerican 1 i individ is Hispanic when young, had married parents individ's yrs of education 29.0g 29.0g 29.09 29.09 29.0g 29.09 age float float individ's income natural log of individ's income labor mkt experience labor mkt experience SQUARED dummy variable for male float float 29.09 Model 1. reg Inincome hispanic black female educatn exper exper_sq Source 33 MS Model Residual 926.716557 3546.55534 6 6533 154.452759 .542867001 Number of obs = F 6, 6533) Prob > F R-squared Adj R-squared = Root MSE 6540 284.51 0.0000 0.2072 0.2064 .7366 Total 4473.2719 6539 68409113 Inincome Coef. Std. Err. P>t! [95Con. Intervall hispanic! black female educatni exper -.0430250 -.2086424 -.391 3941 .11522 . 1148793 .0412799 .0208442 .0183 836 .0036901 .0248611 -1.04 -10.02 -21.29 31.22 0.297 0.000 0.000 0.000 0.000 -.123948 -. 2495036 -.427432 .1079862 .0661433 0378963 1677012 -- 355 3563 1224539 .1636152 exper_ -.0031641 7.45476 .0011719 .1377502 -2.70 54.12 0.007 0.000 -.0054613 7.184724 -.0008666 7.724795 cons 1 Model 2. gen femeduc=female* educatn reg Inincome hispanic black female educatn femeduc exper exper_sq Source 33 MS Model Residual 938.653853 3534.61805 7 6532 134.093408 5411234 Number of obs = FC 7, 6532) = Prob > F R-squared Adj R-squared = Root MSE 6540 247.81 0.0000 0.2098 0.2090 .73561 Total 1 4473.2719 6539 68409112 inincome ! Std. Err. P>It! [95 Cont. Intervall 0.259 hispanic! black 1 female educatn Eeme duc exper exper_99 - cons 046571 -.2136185 -.8477675 .0995072 0346979 . 1079940 -.0029135 7.7048 .0412204 .0208375 .0988845 .0049764 .0073875 .0248644 .0011712 .1474789 -1.13 -10.25 -8.57 20.00 4.70 0.000 0.000 0.000 0.000 0.013 0.000 -. 1273766 - . 254 4660 -1.041614 .0897518 .020216 .0592524 -.0052094 7.415773 .0342345 -.1727702 -.65 39214 -1092827 .0491799 - 1567371 -.0006175 7.993987 52.24 6. (6 pts) Suppose you estimated the following two models. 29.09 29.09 29.09 hgcmom hgcdad *aqo Eemale black hispanic marr_par educatn age income In income exper exper_5 male loat float float float float float float float 29.09 highest grd compltd by mom highest gud compltd by dad armed forces qual test score 1 is individ is a female 1 i individ is AfricanAmerican 1 i individ is Hispanic when young, had married parents individ's yrs of education 29.0g 29.0g 29.09 29.09 29.0g 29.09 age float float individ's income natural log of individ's income labor mkt experience labor mkt experience SQUARED dummy variable for male float float 29.09 Model 1. reg Inincome hispanic black female educatn exper exper_sq Source 33 MS Model Residual 926.716557 3546.55534 6 6533 154.452759 .542867001 Number of obs = F 6, 6533) Prob > F R-squared Adj R-squared = Root MSE 6540 284.51 0.0000 0.2072 0.2064 .7366 Total 4473.2719 6539 68409113 Inincome Coef. Std. Err. P>t! [95Con. Intervall hispanic! black female educatni exper -.0430250 -.2086424 -.391 3941 .11522 . 1148793 .0412799 .0208442 .0183 836 .0036901 .0248611 -1.04 -10.02 -21.29 31.22 0.297 0.000 0.000 0.000 0.000 -.123948 -. 2495036 -.427432 .1079862 .0661433 0378963 1677012 -- 355 3563 1224539 .1636152 exper_ -.0031641 7.45476 .0011719 .1377502 -2.70 54.12 0.007 0.000 -.0054613 7.184724 -.0008666 7.724795 cons 1 Model 2. gen femeduc=female* educatn reg Inincome hispanic black female educatn femeduc exper exper_sq Source 33 MS Model Residual 938.653853 3534.61805 7 6532 134.093408 5411234 Number of obs = FC 7, 6532) = Prob > F R-squared Adj R-squared = Root MSE 6540 247.81 0.0000 0.2098 0.2090 .73561 Total 1 4473.2719 6539 68409112 inincome ! Std. Err. P>It! [95 Cont. Intervall 0.259 hispanic! black 1 female educatn Eeme duc exper exper_99 - cons 046571 -.2136185 -.8477675 .0995072 0346979 . 1079940 -.0029135 7.7048 .0412204 .0208375 .0988845 .0049764 .0073875 .0248644 .0011712 .1474789 -1.13 -10.25 -8.57 20.00 4.70 0.000 0.000 0.000 0.000 0.013 0.000 -. 1273766 - . 254 4660 -1.041614 .0897518 .020216 .0592524 -.0052094 7.415773 .0342345 -.1727702 -.65 39214 -1092827 .0491799 - 1567371 -.0006175 7.993987 52.24
