Solution Manual for Using Econometrics: A Practical Guide, 7th Edition

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Instructor’s ManualAnswers to Odd-numbered ExercisesChapter11-3.(a)Thecoefficientof Li represents the change in the percentage chance of making a putt whenthe length of the putt increases by one foot. In this case, the percentage chance of making theputt decreases by 4.1 for each foot longer the putt is.(b)The equations are identical. To convert one to the other, note thatˆPi= Pi–ei, which is truebecause ei= Pi-ˆPi(or more generally, ei= Yi–ˆYi).(c)42.6 percent, yes; 79.5 percent, no (toolow);-18.9 percent, no (negative!).(d)One problem is that the theoretical relationship between the length of the putt and thepercentage of putts made is almost surely non-linear in the variables; we’ll discuss modelsappropriate to this problem in Chapter 7. A second problem is that the actual dependentvariable is limited by zero and one but the regression estimate is not; we’ll discuss modelsappropriate to this problem in Chapter 13.1-5.(a)βʏis the change in S caused by a one-unit increase in Y, holding G constant andβGis thechange in S caused by a one-unit increase in G, holding Y constant.(b)+,-(c)Yes. Richer states spend at least some of their extra money on education, but states withrapidly growing student populations find it difficult to increase spending at the same rate asthe student population, causing spending per student to fall, especially if you hold the wealthof the state constant.(d)Ŝi=-183 + 0.1422Yi-59.26Gi. Note that 59.26 ∙ 10 = 5926 ∙ 0.10, so nothing in theequation has changed except the scale of the coefficient of G.1-7.(a)β2represents the impact on the wage of theith worker of a one-year increase in the educationof theith worker, holding constant that worker’s experience and gender.(b)β3represents the impact on the wage of theith worker of being male instead of female,holding constant that worker’s experience and education.(c)There are two ways of defining such a dummy variable. You could define COLORi= 1 if theith worker is a person of color and 0 otherwise, or you could define COLOR1= 1 if theithworker is not a person of color and 0 otherwise. (The actual name you use for the variabledoesn’t have to be “COLOR.” You could choose any variable name as long as it didn’tconflict with the other variable names in the equation.)(d)We’d favor adding a measure of the quality of the worker to this equation, and answer iv, thenumber of employee of the month awards won, is the best measure of quality in this group.As tempting as it might be to add the average wage in the field, itwould be the same for eachemployee in the sample and thus wouldn’t provide any useful information.

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