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2. Linear Probability Model and Logit (Week 11) Suppose you want to estimate the following regression modelling the probability that a household purchases renewable electricity, renewable = a + sqft + osolar + , where renewable is a dummy variable that takes the value of one if a household purchases renewable electricity and zero otherwise, sqft is the square footage of a home, and solar is a dummy variable that takes the value of one if a home has solar panels and zero otherwise. a Now, suppose you decide to estimate a logit model. The estimated regression line is: renewable = -0.9100+ 0.0009sqft 0.3437solar. 6. Does an increase in square footage increase or decrease the probability of purchasing renewable electricity? 7. Does having solar panels increase or decrease the probability of purchasing renewable electricity? a = 8. What is the predicted probability if a home is 1,000 square feet and does not have solar panels (1.e., sqft = 1,000 and solar = 0)? You'll need to use the formula renewable = 1+exp(-(+Bsqft+#solar))' where exp(-(+Bsqft + solar)) = 1.0101. 1 = = 9. What is the predicted probability if a home is 1,001 square feet and does not have solar panels (1.e., sqft = 1,001 and solar = 0)? You'll need to use the formula renewable = 1+exp(-(&+Bsqft+@solar), where exp(-( + sqft + &solar)) = 1.0091 10. Based on your answers to (8.) and (9.), what is the partial effect of a 1-unit increase in square footage? 11. What advantage does the logit model have over the linear probability model? Hint: Your answer 2. Linear Probability Model and Logit (Week 11) Suppose you want to estimate the following regression modelling the probability that a household purchases renewable electricity, renewable = a + sqft + osolar + , where renewable is a dummy variable that takes the value of one if a household purchases renewable electricity and zero otherwise, sqft is the square footage of a home, and solar is a dummy variable that takes the value of one if a home has solar panels and zero otherwise. a Now, suppose you decide to estimate a logit model. The estimated regression line is: renewable = -0.9100+ 0.0009sqft 0.3437solar. 6. Does an increase in square footage increase or decrease the probability of purchasing renewable electricity? 7. Does having solar panels increase or decrease the probability of purchasing renewable electricity? a = 8. What is the predicted probability if a home is 1,000 square feet and does not have solar panels (1.e., sqft = 1,000 and solar = 0)? You'll need to use the formula renewable = 1+exp(-(+Bsqft+#solar))' where exp(-(+Bsqft + solar)) = 1.0101. 1 = = 9. What is the predicted probability if a home is 1,001 square feet and does not have solar panels (1.e., sqft = 1,001 and solar = 0)? You'll need to use the formula renewable = 1+exp(-(&+Bsqft+@solar), where exp(-( + sqft + &solar)) = 1.0091 10. Based on your answers to (8.) and (9.), what is the partial effect of a 1-unit increase in square footage? 11. What advantage does the logit model have over the linear probability model? Hint: Your
