Write down your test hypothesis p-value and conclusion

Reference no: EM133565706

Problem

Use the data set mroz.txt to do the following regressions. To read the data set into r, you may use the read. Table command, such as: data <- read.table("mroz.txt")

1. Run an OLS regression of logarithm wage (lwage) on years of schooling (educ), i.e., lwagei = α + βeduci + ui. Use a sentence to interpret βˆOLS.

2. Use ivreg command to run a Two Stage Least Squares (2SLS) regression. Use father's years of schooling (fatheduc) as the instrument variable. Use a sentence to interpret βˆ 2SLS.

3. Check the F-statistics from the first-stage regression. How large it is? Is the instrument variable weak?

4. Perform a Hausman's test to compare OLS with 2SLS estimators. Write down your test hypothesis, p-value and conclusion.

5. Discuss if father's years of schooling (fatheduc) is a solid instrument variable, i.e., satisfies conditions of instrument variables.

Reference no: EM133565706

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