Introduction to Econometrics 3rd Edition by James Stock, James Stock

Exercise 10

Use the data set ColIegeDistance described in Empirical Exercise 1 to answer the following questions.
a. An education advocacy group argues that, on average, a person's educational attainment would increase by approximately 0.15 year if distance to the nearest college is decreased bY₂0 miles. Run a regression of years of completed education (ED) on distance to the nearest college (Dist). Is the advocacy groups' claim consistent with the estimated regression Explain.
b. Other factors also affect how much college a person completes. Does controlling for these other factors change the estimated effect of distance on college years completed To answer this question, construct a table like Table 1. Include a simple specification [constructed in (a)], a base specification (that includes a set of important control variables), and several modifications of the base specification. Discuss how the estimated effect of Dist on ED changes across the specifications.
c. It has been argued that, controlling for other factors, blacks and His-panics complete more college than whites. Is this result consistent with the regressions that you constructed in part (b)
Exercise 1
A regression of average weekly earnings {AWE, measured in dollars) on age (measured in years) using a random sample of college-educated fulltime workers aged 25-65 yields the following: = 696.7 + 9.6 X Age, R 2 = 0.023, SER = 624.1.
a. Explain what the coefficient values 696.7 and 9.6 mean.
b. The standard error of the regression {SER) is 624.1. What are the units of measurement for the SERI (Dollars Years Or is SER unit-free )
c. The regression R 2 is 0.023. What are the units of measurement for the R 2 (Dollars Years Or is R 2 unit-free )
d. What is the regression's predicted earnings for a 25-year-old worker A 45-year-old worker
e. Will the regression give reliable predictions for a 99-year-old worker Why or why not
f. Given what you know about the distribution of earnings, do you think it is plausible that the distribution of errors in the regression is normal {Hint: Do you think that the distribution is symmetric or skewed What is the smallest value of earnings, and is it consistent with a normal distribution )
g. The average age in this sample is 41.6 years. What is the average value of AWE in the sample {Hint: Review Key Concept 4.2.)
Table 1
Results of Regressions of Average Hourly Earnings on Gender and Education Binary Variables and Other Characteristics Using 1998 Data from the Current Population Survey
Dependent Variable: average hourly earnings (AHE).