The Pennsylvania State University;Econ 490 Summer 2010 Session One;ASSIGNMENT 2;Due: Thursday May 27th in Class;Please show all the steps of your work so that partial points might be given.;1.;Someone did a study on the relationship between infant birth weight and the average number;of cigarettes the mother smoked per day during pregnancy. The following simple regression;was estimated using data on n=1388 births;#$%&' = 119.77-0.514 cigs;(17.2) (0.25);Where the the standard errors of the estimates are in the parathesis..;(a) Test whether the slope is 0.;(b) What is the p-value of this test?;(c) Construct a 90% confidence interval for the slope.;2.;Someone trys to find out whether the salary of CEOs is affected by the years of their;serving in the same company. He uses a log-linear model;ln(salary)=!) +!* +#,-.+u;(a) What are the possible factors that you think the error term u include?;(b) Will the OLS estimator of !* be unbiased based on your answer in part (a)?;(c) What is an unbias estimator?;The Pennsylvania State University;Econ 490 Summer 2010 Session One;(d) Suppose the estimated regression is;/0!1.,2,-+3=2.78+0.009 years;What is the interpretation of the slope estimate 0.009.;3.;Suppose the a researcher, using wage data on 250 randomly selected male workers and 280;female workers, estimate the OLS regression;,%# 4 56786 9 6756:,,2#;(0.23);(0.36);Where Male is a binary variable that is equal to 1 if the person is a male and 0 if the person is a;female.;(a) Define the wage gender gap as the difference in the mean earnings between men and;women. What is the estimated gender gap?;(a) Is the estimated gender gap significantly different from zero? What is the p-value of this;test? (The numbers in parathesis are the standard errors for the corresponding estimates).;(b) In the sample, what is the mean wage of women? Of men?
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