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    probability of the error (STATA)

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    1. Yes, we use STATA to test.

    2. Tax is the dependent variable: tax = B1 + B2income + e

    The gross income and tax paid by a cross-section of 30 companies in
    1988 and 1989 is given in the file tax.dta

    Consider the estimate for B2 for 1989 and the corresponding estimated
    variance. Pretend that the estimated variance is the same
    as the true variance var(b2), and assume that b2 is normally distributed.
    Find the probability that the sampling |b2 − B2| is
    (i) less than 0.04 and (ii) less than 0.01.

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    Solution Preview

    Use stata commend to regress tax revenue on income in year 1989:
    regress tax income if year==1989
      Number of obs 30
    Source SS df M     F(1, ...

    Solution Summary

    The expert examines the probability of the error (STATA).