Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that you have the individual wage data for three counties in Atlanta: Dekalb county, Fulton county, and Gwinnett county. You are considering the following

Suppose that you have the individual wage data for three counties in Atlanta: Dekalb county, Fulton county, and Gwinnett county. You are considering the following model wagei = 0 + 1Gi + 2Fi + 3agei + 4age2 i + Ui Here, Gi is the Gwinnett county dummy variable and Fi is the Fulton county dummy variable. After the fitting the model using the OLS estimator, you found that 3 > 0 and 4 < 0. Hence the fitted model suggests that As age increases the wage increases but at a diminishing rate. You want to find out whether the age level where the positive age effect changes to the negative age effect is greater than 65 or not. The age level where the slope changes the sign satisfies 3 + 2 4 agei = 0. Hence the relevant null hypothesis is H0 : 3 24 = 65 H1 : 3 24 > 65 which can be rewritten as H0 : 3 + 1304 = 0 H1 : 3 + 1304 < 0 You want to rewrite your model by removing 3 and introducing the relevant such that your hypothesis can be written as H0 : = 0 H1 : < 0. Choose the regressor that does not appear in this rewritten model. (a) Gi (b) Fi (c) agei (d) age2 i (e) none of abov

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction to Econometrics

Authors: James H. Stock, Mark W. Watson

3rd edition

133595420, 978-0138009007, 138009007, 978-0133486872, 133486877, 978-0133595420

More Books

Students also viewed these Finance questions