Political Science 328, Winter Semester 2012 Assignment #7 This assignment is due in the assignment drop-box outside of 745

SWKT by 10am on Friday, March 9, 2012. It is to be turned in as three separately stapled and clearly labeled parts, outlined below. Please refer to the course syllabus regarding how assignments should be labeled. You will receive full credit only if you follow these instructions. Highlight your final answer to distinguish it from your work and text. You will receive full credit only if your work is organized and clear to follow. Please also include an Appendix with any memo questions in an assignment. This memo must include tables of any tests you have run along with any graphs you see fit to include. Tables must follow the instructions below (see Note). *Note: Stata output will not be accepted on homework assignments. However, graphics generated by Stata (histograms, box plots, scatter plots, etc.) are acceptable, but remember to clearly title them and label the axis, variables, etc. It is a good idea to round to just a few decimal places (never more than four) and replace Stata notation and variable names with labels clearly understood. Report only data from Stata that are relevant to explaining your tools of analysis. Part 1: {5 points} Along with the necessary calculations by hand, in just a few sentences each, answer the following questions using this table. Average Hourly Earnings on Gender and Education Binary Variables and Other Characteristics Using 1998 Data from the Current Population Survey Dependent variable: average hourly earnings (AHE) (1) (2) (3) Regressor: College (X1) 5.46 5.48 5.44 (0.21) (0.21) (0.21) Female (X2) -2.64 -2.62 -2.62 (0.20) (0.20) (0.20) Age (X3) 0.29 0.29 (0.04) (0.04) Northeast (X4) 0.69 (0.30) Midwest (X5) 0.60 (0.28) South (X6) -0.27 (0.26) Intercept 12.69 4.40 3.75 (0.14) (1.05) (1.06) F-statistic for regional effects = 0 6.10 Regression summary statistics R2 0.176 0.190 0.194 SER 6.27 6.22 6.21 N 2400 2400 2400

1. Using the regression results in column (1): a. Is the college-high school earnings difference estimated from this regression statistically significant at the 5% level? Construct a 95% confidence interval of the difference. b. Is the male-female earnings difference estimated from this regression statistically significant at the 5% level? Construct a 95% confidence interval for the difference. 2. Using the regression results in column (2): a. Is age an important determinant of earnings? Use an appropriate statistical test and/or confidence interval to explain your answer. b. Sally is a 29-year-old female college graduate. Betsy is a 34-year-old female college graduate. Construct a 95% confidence interval for the expected differences between their earnings. 3. Using the regression results in column (3): a. Do there appear to be important regional differences? Use an appropriate hypothesis test to explain your answer. b. Juanita is a 28-year-old female college graduate from the South. Molly is a 28-year-old female college graduate from the West. Jennifer is a 28-year-old college graduate from the Midwest. i. Construct a 95% confidence interval for the difference in expected earnings between Juanita and Molly ii. Explain how you would construct a 95% confidence interval for the difference in expected earnings between Juanita and Jennifer. (Hint: What would happen if you included West and excluded Midwest from the regression?). Part 2: Use the data set CPS04 on the Stock and Watson Student Resources website to answer the following questions. 4. {7 points}: a. Run a regression of average hourly earnings (AHE) on age (Age). What is the estimated intercept? What is the estimated slope? b. Run a regression of AHE on Age, gender (Female), and education (Bachelor). What is the estimated effect of Age on earnings. Construct a 95% confidence interval for the coefficient on Age in the regression. Also make sure to report adjusted R2. c. Are the results from the regression in (b) substantively different from the results in (a) regarding the effects of Age and AGE? Does the regression in (a) seem to suffer from omitted variable bias? d. Bob is a 26-year-old male worker with a high school diploma. Predict Bobs earnings using the estimated regression in (b). Alexis is a 30-year-old female worker with a college degree. Predict Alexis earnings using the regression. e. Compare the fit of the regression in (a) and (b) using the regression standard errors, R2 and adjusted R2. Why are the R2 and adjusted R2 so similar in regression (b)? f. Are gender and education determinants of earnings? Test the null hypothesis that Female can be deleted from the regression. Test the null hypothesis that Bachelor can be deleted from the regression. Test the null hypothesis that both Female and Bachelor can be deleted from the regression.

Part 3: 5. {8 points}: a. Using SPSS, run the same regression you did in (4.b) without robust standard errors. In addition to the normal output, find the confidence intervals of the regression coefficients, as well as the predicted values, residuals, and the mean and individual prediction intervals. To bring in data, save data in .xls format. Begin SPSS session and go to the main operating page, click on file open data To run a regression, click on analyze regression linear. (Hint: To find the additional output, make sure to click on and explore ALL four buttons on the right). Print and attach the first few pages of your output and label (by hand is fine) where to find the relevant statistics. b. Using SAS, run the same regression you did in (4.b) without robust standard errors. In addition to the normal output, find the predicted values, residuals, and the mean and individual prediction 95% confidence intervals. To bring the data, SAS requires a couple of extra steps. First, go to blackboard and find the SAS-formatted data and save it to the desktop. Open up SAS 9.3 go to the explore tab Library option to copy the data, drag data file into Workclick on work to make sure its there. Click on solutions ASSIST. Click continue Data Analysis Regression Linear Click Table Work click on CPS04 OK. Now use the Dependent and Independent options to select what you need. Also, search through Additional Options to find the other relevant statistics. Go to toolbar Run Submit Enjoy. Print and attach the output and first page of predicted values and label (by hand is fine) where to find the relevant statistics. c. Using excel, run the same regression you did in (4.b) without robust standard errors. In addition to the normal output find the 95% confidence interval of the coefficients, residuals, and predicted values. Open CPS04 excel file. First, you must add analysis toolpak. File Options Addins Go...Click on Analysis ToolPak OK. Click on Data in toolbar Data Analysis Regression OK. Print and attach the output and first page of predicted values and label (by hand is fine) where to find the relevant statistics.