You extract approximately 5,000 observations from the Current Population Survey (CPS) and estimate the following regression function: $\widehat { \text { ahe } }$ = 3.32 - 0.45 $\times$ Age, R²= 0.02, SER = 8.66 (1.00) (0.04)
Where ahe is average hourly earnings, and Age is the individual's age. Given the specification, your 95% confidence interval for the effect of changing age by 5 years is approximately

Question

You extract approximately 5,000 observations from the Current Population Survey (CPS) and estimate the following regression function:

\widehat { \text { ahe } }

= 3.32 - 0.45

\times

Age, R²= 0.02, SER = 8.66 (1.00) (0.04)
Where ahe is average hourly earnings, and Age is the individual's age. Given the specification, your 95% confidence interval for the effect of changing age by 5 years is approximately

Quizplus · Accepted Answer

The effect of changing age by 5 years is -0.45 * 5 = -2.25. The standard error for the age coefficient is 0.04, so for 5 years, it is 0.04 * 5 = 0.20. The 95% confidence interval is -2.25 ± 1.96 * 0.20, which is approximately [-2.65, -1.85]. However, since the question asks for the absolute value, the interval is [1.85, 2.65], which rounds to [1.96, 2.54].

You Extract Approximately 5,000 Observations from the Current Population Survey ahe ^\widehat { \text { ahe } } ahe

You Extract Approximately 5,000 Observations from the Current Population Survey $\widehat { \text { ahe } }$