11 May WHAT IS THE PREDICTED DIFFERENCE IN YEARS OF EDUCATION BETWEEN B AND A‘?
Using data from 1988 for houses sold in Andover. Massachusetts. from Kiel and McClain (1995).
the following equation relates housing price (price) to the distance from a recently
built garbage incinerator (dist):
i8Q?r?c’e‘) = 9.40 + 0.312 logtdist)
II = l3S.R3 = 0.162.
Interpret the coefficient on log(di5t). Is the sign of this estimate what you expect it
to be?
Do you think simple regression provides an unbiased estimator of the ceteris paribus
elasticity of price with respect to dist? (Think about the city’s decision on where to
put the incinerator.)
i) What other factors about a house affect its price? Might these be correlated with
distance from the incinerator?
The data in WAGE2.RAW on working men was used to estimate the following
equation:
21745 = lo.36 – .094 sibs + .131 meduc + .210 feduc
n = 722. R’ = .214,
where educ is years of schooling. sibs is number of siblings. media‘ is mother’s years of
schooling. and feduc is father’s years of schooling.
(ll Does sibs have the expected effect? Explain. Holding meduc and feduc fixed. by
how much does sibs have to increase to reduce predicted years of education by one
year? (A noninteger answer is acceptable here.)
(ii) Discuss the interpretation of the coefficient on meduc.
(iii) Suppose that Man A has no siblings. and his mother and father each have 12 years
of education. Man B has no siblings. and his mother and father each have 16 years
of education. What is the predicted difference in years of education between B
and A‘?
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