ECON20003 - Quantitative Methods 2 Assignment

Question 1:The following model has been used to estimate the relationship between the wage per hour and the levels of education and experience.

Answer the following questions:

1. Report the results of the regression.
2. Comment on the effect ofEducationonln(Wage).
3. Derive an expression for theElasticityofWagewith respect toExperience. Calculate theElasticityfor afemaleperson with(i)16 years of education & 10 years ofexperienceand(ii)10 years of education & 10 years of experience.Interpret your results.
4. For two individuals with equal levels ofEducationandExperience, calculate the difference between the wages of afemaleand amaleComment on the difference.
5. Test the overall significance of the model at the 1% level(assuming all OLS assumptions are valid).
6. Given that the correlation coefficient betweenExpandExp2is 0.9, comment on whether the model suffers from

Question 2:Background:Health insurance companies and governments are interested in knowing which factors determine peoples decisions to visit doctors. A researcher has collected data on 300 individuals on the following variables:

Doctor=A dummy variable 1(if theindividual visited a doctor in a given year) and 0(otherwise)
ln =log ( Income of the indivdual 1000)
Sex=1(if the person is a Male) = 0(otherwise)
Age=Age of the person

The data is available in theEXCELfileQ2A3.xlsx. The researcher considers the following discrete outcome model where the decision to take private insurance is related to other variables

Undertake the following:

1. Estimate aLogitmodel for this data set. Report the EViews output[you dont have to write any equations, Rp2etc, just report the EViews table from your estimation].
2. Comment on the effect ofIncome,SexandAgeon the probability of visiting a doctor (you are not required to compute marginal effects).
3. Find the average marginal effect oflnIncomeand interpret this estimate.
4. Test whether being male increases the probability of visiting a doctor.
5. Estimate aProbitmodel and report the EViews output[just EViews output].
6. Find the average marginal effectsforlnIncomefrom theProbitmodel and interpret this estimate.
7. Test the overall significance of theLogitmodel (write down the six steps).
8. Calculate an appropriate goodness of fit measure for the estimatedLogitandProbitmodels and use it to choose your preferred model.