Question 1

Consider the regression model

Earnings=1+2Race+3City+4(RaceCity)+u

where,

City={1if individual lives in London

0if individual lives in Paris

Race={1if individual is Black

0if individual is White

A researcher wants to use this model to test whether there is a statistically significant difference in the impact of racial discrimination on earnings between London and Paris. Which of the following techniques is the correct way to test for this? The researcher should

A. Test forHo: 4=0 Ha:Ho is false

B. Run the given model for two subsamples of the data - one is the data on London, and the other the data on Paris - and do the appropriate F-test.

C. Conduct a Chow Test

D. Test forHo: 3=4=0 Ha:Hois false

Question 2

Consider the regression model:

testscore=1+2IQ+3male+4(IQmale)+u

where,testscore= students' test score

IQ= student's IQ

male= 1 if student is male, = 0 if student is female

Based on this model, how do we assess the statistical significance ofIQ?

A. Test, Ho: 2=0 Ha: Ho is false

B. Test, Ho: 2=4=0 Ha: Ho is false

C. First test, Ho: 2=0 Ha: Ho is false. If we do not reject, then we test, Ho: 4=0 Ha: Ho is false

D. First test, Ho: 2=0 Ha: Ho is false. If we reject, then we test, Ho: 4=0 Ha: Ho is false