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Suppose a researcher is interested in estimating the impact of corn yields (measured in bu/acre) on whether a farm household participates in off-farm labor market
Suppose a researcher is interested in estimating the impact of corn yields (measured in bu/acre) on whether a farm household participates in off-farm labor market or not. The researcher has collected a sample of 1,000 farms with information on whether each farm participated in off-farm labor market or not and each farm's corn yields. The researcher first estimated the following model: Y_i=_0+_1 Yield_i+_2 Irrigated_i+ _i where Y_i=1 if a farm household i participates in off-farm labor market =0 otherwise and Yield_i is corn yield in bu/acres, Irrigated_i is an indicator variable of a farm is irrigated or not for farm i. The estimated result is 0.87-0.03*Yield_i-0.4*Irrigated_i (0.45) (0.02) (0.1) Provide the predicted value of Y_i when the yield is 125 bu/acre and a farm that is irrigated. What is the limitation of the linear probability model (10 points)
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