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               Econ 120B, Winter 1998  --  Homework #3 (5%)
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This homework is due at 2:20pm on the last day of class.  Papers turned
in at the end of the class will carry a 25% penalty and THOSE TURNED IN
LATER THAN THAT WILL NOT BE ACCEPTED.  As before, team up with others
(maximum 3 persons per team) and submit a single paper with all names.


I.  Do Exercise 3.5 on Page 134 (fourth edition only).  You should start
    this right away.

II.
First study the "walk-through" applications in Sections 4.6 and 4.7 
(fourth edition only).  If you have not already done it, next carry out
Practice Computer Session #2 posted on the internet using the
ESL/ESLWIN programs.  This will give you practice for the following
exercise.

DATA4-13 described in Appendix D, Page D-12 (fourth edition only) has 
cross section data on baseball attendance and its determinants in 78 
cities.  You are to carry out an empirical analysis of this data set 
using the techniques I describe in class.


FROM YOUR HOME COMPUTER
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If you have ESLWIN at home and you prefer that, run it, select the data
file called data4-13 and carry out the steps indicated below in II.1. 
When output appears through NOTEPAD, choose File, Page Setup, reduce
margins to 0.5i or 0.25i, and then Print.

If you want to work within DOS entirely, first click the MSDOS icon
from Main (Windows 3.1) or from Start, Programs (Windows 95) and exit
temporarily to DOS.  Then

    cd  \esl  
    esl  data4-13  

to get the ? prompt.  Then type the commands given below in II.1.  For
printing, type the following commands from the C:\ESL prompt.

    copy  inpfile  inp     (say yes to overwrite previous inp if asked)
    esl  data4-13  -b  <  inp  >  out
    lpr  out  >  prn


FROM ECON 100 LAB
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If ESLWIN works and you prefer that, run it, select the data file
called data4-13 and type the commands listed below in II.1.  When
output appears through NOTEPAD, choose File, Page Setup, and reduce
margins to 0.5i or 0.25i, and then Print.

If you want to work within DOS entirely, first click the MSDOS icon
from Main to get to DOS.  Then

    cd  \pgms\esl  
    esl  data4-13  

to get the ? prompt.  Then type the commands given in II.1 below.
For printing, type the following commands from the C:\ESL prompt.

    copy  inpfile  inp     (overwrite previous inp if asked)
    esl  data4-13  -b  <  inp  >  out
    lpr  out  >  prn

II.1  First estimate the most general "kitchen sink" model using the OLS
      procedure (ols 1 0 2 ....  13 ;).  Next use the "data-based model
      reduction technique" discussed in class (also in Chapter 4) to
      omit variables one at a time (do not omit the constant term under
      any circumstances) until all variables (ignoring the constant
      term) have regression coefficients significant at the 10 percent
      level of significance.  When you are done, type quit to exit ESL. 
      Follow the directions given above to obtain a printed output
      which you should submit.  ONLY ORIGINAL PRINTOUTS ARE ACCEPTABLE,
      PHOTO COPIES ARE NOT.

      In the printout explain why you omitted each of the variables.

II.2  Using the significance of coefficients, omitted variable bias, and
      the model selection statistics choose the "best" model.  Explain
      why you choose that as the best model.

II.3  In the best model you chose, state whether the signs of the 
      regresssion coefficients (again ignore the constant term) agree 
      with your intuition or any of them "wrong"?  Explain what you 
      expected and why.

II.4  Choose the original kitchen sink model as the unrestricted model 
      and your best model as the restricted model and conduct an 
      appropriate test for the JOINT SIGNIFICANCE of the coefficients 
      for the omitted variables, using a 10 percent level.  Be sure to
      write down the null and alternative hypotheses, the test
      statistic and its distribution including the d.f., the critical 
      value (or range), the decision rule, and the decision.  Show all
      your steps and your conclusion in words as to whether the 
      coefficients are jointly significant or not.

II.5  In the final model you chose, interpret the results by stating
      what is significant and what is not, what the marginal effects
      are and whether they are sensible.  For answering this, use the 
      interpretation of results in Section 4.7 as a guide.