Question
One of your peers wants to analyze the relationship between grade point average and growing up in urban or rural municipalities. Using the OLS estimator
One of your peers wants to analyze the relationship between grade point average and growing up in urban or rural municipalities. Using the OLS estimator she estimates the following relationship:
GPA^ = 3.03 + 1.04 urban(1)
Where GPA is the grade point average when graduating from high school and urban is a binary variable equal to 1 if the person grew up in a urban municipality and 0 otherwise.
a. Interpret the result in equation (1)
In a separate regression she also decides to add a binary variable mother_college which is equal to 1 if the mother has a college degree and 0 otherwise:
GPA^ = 2.94 + 0.4 urban + 0.67 mother_college (2)
b. Why do you think the coefficient on the urban variable have changed so much in the second regression (equation 2). Explain your answer.
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