https://docs.google.com/spreadsheets/d/1nMlo6hX2RncJKaoptEQA3nYvzJWbrEub_BCPiKcsa9w/edit?usp=sharing

1. (Univariate OLS) In order to study the effect of education (educ) on IQ (iq), we have a data set called PS2Earning.txt, which contains information on 935 individuals. Read in the data set and do the following. (a) Using the formulas on slide 20 of Lecture Note 3 to estimate the coefficient a and b in the following model, iqi = a + b educi + ci What is the covariance between educ and the estimated residual? What can you say about the normal equation? (b) Now use the the formula d = i= Ciyi to estimate the coefficient d in the following model, iqi = d educi + Wi