# Econometrics

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Consider the following relationship between the amount of money spent by a province on health care (Y) and the province's GDP (X):...

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statistics for economists/econometrics

Hi, I am having difficulty completing and understanding the attached problems. Please provide me with step-by-step detailed explanations to each problem. I have included the EXCEL version of the data for question 3 in a separate attachment. The deadline is tomorrow, Nov. 11 at 12:00 pm.

Thanks in advance

Bid Credits: 20 Deadline: November 11, 2005, 7:08 pm EST

1. Since D2 = 1 - D1, we can substitute this into the second regression:

Y = a0 + a1 D2 + a2 X + a3 (D2 * X) + e

Y = a0 + a1 (1 - D1) + a2 X + a3 (1 - D1) * X + e

Y = a0 + a1 - a1 D1 + a2 X + a3 (X - D1 * X) + e

Y = a0 + a1 - a1 D1 + a2 X + a3 X - a3D1 * X + e

Y = (a0 + a1) - a1 D1 + (a2 X + a3) X - a3D1 * X + e

Compared to the first equation, we know:

B0 = a0 + a1

B1 = - a1

B2 = a2 X + a3

B3 = - a3

2.

a) Y = 6.25 + 0.23 M - 0.79 F + e

(0.02) (0.24)

where M is number of months of employment and F is female dummy variable

b) For men: Y = 6.25 + 0.23 M + e because F = 0

For women: Y = 6.25 + 0.23 M - 0.79 + e

Or, Y = 5.46 + 0.23 M + e because F = 1

Thus, these two regression lines are parallel to each other over M.

c) We use the two-tailed 95% t value with df = 9-3 = 6, i.e., t = 2.45

Then lower limit = B2 - t * SE2 = -0.79 - 2.45*0.24 = -1.38

upper limit = B2 + t * ...

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