Introductory Econometrics 4th Edition by Jeffrey Wooldridge

Exercise 19

Let us modify Computer Exercise C8.4 by using voting outcomes in 1990 for incumbents who were elected in 1988. Candidate A was elected in 1988 and was seeking reelection in 1990; voteA90 is Candidate A's share of the two-party vote in 1990. The 1988 voting share of Candidate A is used as a proxy variable for quality of the candidate. All other variables are for the 1990 election. The following equations were estimated, using the data in VOTE2.RAW: = 75.71 +.312 prtystrA + 4.93 democA
(9.25) (.046) (1.01)
-.929 log(expendA) - 1.950 log(expendB)
(.684) (.281)
n = 186, R 2 =.495, R 2 =.483,
and = 70.81 +.282 prtystrA + 4.52 democA
(10.01) (.052) (1.06)
-.839 log(expendA) - 1.846 log(expendB) +.067 voteA88
(.687) (.292) (.053)
n = 186, R 2 =.499, 2 =.485.
(i) Interpret the coefficient on voteA88 and discuss its statistical significance.
(ii) Does adding voteA88 have much effect on the other coefficients