Explore BrainMass
Share

Explore BrainMass

    Regression Model, Omitted Bias and F-Stat

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The following regression model represents the demand for peanut butter:

    log qt = B1 + B2 logpt + B3log rt + B4logmt + ut

    where qt is the quantity of peanut butter consumed at time t; pt is the
    price of peanut butter; rt is the price of jelly; and mt is income per
    capita. Suppose an analyst estimates the following model:
    log qt = B1 + B2 logpt + B3logmt + et
    we expect B2 < 0 (law of demand) and B4 > 0 (peanut butter is a
    normal good). What is the sign of omitted variable bias of B2 if

    (a) B3 < 0 (peanut butter and jelly are complements) and pt and rt
    are positively correlated.
    (b) B3 > 0 (peanut butter and jelly are substitutes) and pt and rt are
    positively correlated.
    (c) B3 < 0 (peanut butter and jelly are complements) and pt and rt
    are negatively correlated.

    2. Test the null hypothesis that all coefficients except the intercept
    equal to 0.

    lwage = 1 + 2educ + 3married + 4exper + 5exper2 + et

    storage display value
    variable name type format label variable label
    -------------------------------------------------------------------------------
    lwage float %9.0g log(wage)
    id int %9.0g person identifier
    exper byte %9.0g age - educ - 6
    expersq int %9.0g exper^2
    married byte %9.0g =1 if married, 1976
    IQ int %9.0g IQ score
    KWW byte %9.0g knowledge world of work score
    motheduc byte %9.0g mother's schooling
    fatheduc byte %9.0g father's schooling
    educ byte %9.0g years of schooling, 1976
    nearc4 byte %9.0g =1 if near 4 yr college, 1966
    nearc2 byte %9.0g =1 if near 2 yr college, 1966
    weight float %9.0g NLS sampling weight, 1976

    Source | SS df MS Number of obs = 3003
    -------------+------------------------------ F( 4, 2998) = 212.57
    Model | 130.571897 4 32.6429744 Prob > F =
    Residual | 460.389254 2998 .153565462 R-squared =
    -------------+------------------------------ Adj R-squared = 0.2199
    Total | 590.961151 3002 .196855813 Root MSE = .39187

    ------------------------------------------------------------------------------
    lwage | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    educ | .0898329 .0035461 25.33 0.000 .0828799 .0967859
    married | -.0350949 .0035839 -9.79 0.000 -.042122 -.0280678
    exper | .077507 .0070715 10.96 0.000 .0636416 .0913724
    expersq | -.0021298 .0003347 -6.36 0.000 -.0027861 -.0014735
    _cons | 4.667204 .0706975 66.02 0.000 4.528584 4.805825

    © BrainMass Inc. brainmass.com October 9, 2019, 5:35 pm ad1c9bdddf
    https://brainmass.com/economics/regression/regression-model-omitted-bias-f-stat-61555

    Solution Summary

    Omitted bias is examined.

    $2.19