Curtis Miller

11/20/2013
ECON 4650
Assignment 4
1. Answers
a. Controlling for nohschool would result in perfect collinearity between the dummy
variables representing education, and the regression could not be calculated if
that variable is included.

VARIABLES
male
age
hschool
somecoll
bach

(1)
wearn

(2)
wearn

284.4***
(9.549)
8.912***
(0.341)
205.7***
(19.40)
295.5***
(19.16)
795.0***
(18.91)

-74.09***
(22.21)

15.27
(43.29)
7.012***
(0.484)
158.7***
(30.28)
236.3***
(29.38)
692.6***
(29.05)
3.622***
(0.682)
81.12**
(39.39)
97.09**
(38.77)
182.9***
(38.27)
74.94**
(32.25)

13,596
0.275

13,596
0.279

maleage
malehschool
malesomecoll
malebach
Constant
Observations
R-squared

Standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1
b.

Holding all else constant, being male is expected to increase weekly earnings by
$284.40; weekly earnings are expected to increase $8.91 for every year of age;
having completed high school is expected to increase weekly earnings by
$205.70; having some college is expected to increase weekly earnings by
$295.50; and having a bachelors degree or higher is expected to increase weekly
earnings by $795.

c.
The variables from the first model maintain their original meaning. maleage,
malehschool, malesomecoll, and malebach are interaction variables that multiply
the male dummy variable with an education level dummy variable in order to
allow different genders to experience different effects on wage from education.
d. The regression is in the above table. Significance levels for all variables in the
original model save for the coefficient of the male dummy variable, which is no
longer statistically significant from zero. Malehschool and malesomecoll are
statistically significant from zero at a conventional level, though not as significant
as the other variables.
e. The wage gap is hard to pin down in the second model because the gap depends
on age. I find the wage gaps by subtracting the model when male = 0 and all
dummies but one representing a particular education level are zero (thus, the
predicted wage of a female with a particular education) from the model when
male = 1. I find that, for scenarios i-iv, the wage gaps are: i) 15.27+3.622*age; ii)
96.39+3.622*age; iii) 112.36+3.622*age; and iv) 198.17+3.622*age. The wage
gap, in all cases, increases with age.
f. The wage gap is different at different levels of education (though the wage gap
between groups with only a high-school degree and some college appear to be
close together, within one standard deviation). The wage gap appears to increase
with education and age.
2. Answers:
a. This scenario poses a threat to internal validity. Treatment is no longer random,
potentially resulting in omitted variable bias (do curious student have an easier
time focusing?).
b. While the sample size is smaller, this does not pose a threat to internal validity.
The attrition has nothing to do with treatment.
c. This scenario does pose a threat to internal validity. This attrition leads to
attrition bias, which biases the outcome of the study. For example, the remaining
students in the experimental group may be more determined and have an easier
focusing.
d. This scenario poses a threat to internal validity because treatment, again, is no
longer random, potentially causing omitted variable bias (if the students showed
up late, they may have difficulty focusing).
3. Answers
a. The t-value for a sample with 76 degrees of freedom and at the .05 level is 1.67.
Using the t-statistics provided by the problem, all coefficients except for the
TEAM coefficient are statistically significant at the 5% significance level.
b. According to the problem, the d-statistic of the sample is 1.30. Looking at the
table for the Durbin-Watson statistics, I find that the test statistics to use for a
sample with 80 observations (which is close to 81) for a model with five variables
is
and
. I notice that DW is less than . This means I should
reject the null hypothesis of no positive serial correlation. Serial correlation is
potentially a problem with this data.

c. According to the Durbin-Watson test performed in part b), serial correlation is a

potential problem. There are some omitted variables, such as variables for
weather conditions. And I think that PM and PROM need not necessarily be
dummy variables. PM could represent the time of day that a game starts (it could
be implemented in the model as a quadratic equation where attendance increases
as the game is held later in the day up until a particular time, after which
attendance would decrease), and PROM could be converted to dollars spent on
promotion for a particular game, thus allowing for differentiation of promotions.
There also should be a variable representing whether a game is significant from
other games, such as being a play-off game.