Answers Assignment 1

E.2

I implemented the same method we saw in slide 22 based on Mundlak (1978) but instead of estimate
the variance using the bootstrap method I calculated the one of the coefficients of the regression. Then I
used this values to test if both are different from 0. The results of the test say that we reject the
hypothesis if we use a significance level higher than 5.77%

E.3

I downloaded a package that does the bootstrapped Hausman Test. This function calculates the variance
of the difference between the coefficients of the two models using the bootstrap method and uses a
Wald test for the difference of the two estimators. With this test we reject the hypothesis with a
significance level higher than 47.22%. The advantage is that we do not have to calculate the variance-
covariance matrix of the difference, the disadvantage is the computational effort.

E.4

With this test we reject the hypothesis with a significance level higher than 35.42% but V_b-V_B is not
positive definite. The last two test do not reject the null hypothesis with a high significance level so it
seems that RE.3 is holding. However, the significance level in the first test is smaller, maybe the
assumptions of Mundlak (1978) are not valid.