[Note: The assignment will be discussed in lab this week, and will be due in lab next week.]

Economics 421/521

Winter 2009

Homework #2

1. Using the EAEF data set, regress LGEARN on S, EXP, and ASVABC. Use F-tests to determine whether the coefficients on S and EXP are (a) jointly significant, and (b) equal. [Parts (a) and (b) are two separate tests.]

**Note**: Here are the variable definitions (see pages. 443-444 in Appendix B of the
text):

- EARNINGS = current hourly earnings in $ reported in 2002 interview.
- S = Years of schooling (highest grade completed as of 2002).
- EXP = Total out-of-school work experience (years) as of the 2002 interview.
- ASVABC = Scaled standardized test score.

2. Problem 7.1 in the text.

3. Using
this data set, repeat the example from class for the first of the three
cases we discussed, i.e. first regress the log of
salary on a constant and the two variables proxying for experience, years and
years^{2}:

log(salary) = β_{0} + β_{1}*years + β_{2}*years^{2}
+ u_{t}

Then, form the estimated residual squared (resid^{2}) and perform the LM test for heteroskedasticity (note:
resid is the estimated value of u_{t}).

[Note: pdf of problems 7.1 and 7.2, problem 7.2 will be on the next homework.]

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