Calculate correlation coefficients, Econometrics

This problem refers to Doughtery's Educational Attainment and Earnings Functions (EAEF) data set, accessible through the course website. This data is a subset of the U.S. National Longitudinal Study of Youth 1979 (NLSY79). It is a nationally representative panel survey of young people aged 14 to 21 in 1979. Participants were surveyed annually from 1979-1994 and every other year afterwards. The EAEF subsample is made up of 22 randomly selected subsets of 540 individuals each (270 men and 270 women).

Examples in the text use subset 21. Use subset 1 for this problem. The following is a summary of the variables needed for this problem.

S              Years of schooling (highest grade completed as of 2002)

ASVABC     Composite score on the ASVAB, a standardized test of numerical and verbal ability with a mean of 50 and standard deviation of 10

ASVAB02    Score on the arithmetic reasoning section of the ASVAB test

ASVAB03    Score on the word knowledge section of the ASVAB test

ASVAB04    Score on the paragraph comprehension section of the ASVAB test

SM            Years of schooling of respondent's mother

Total work experience in years

Current hourly earnings in $

a) Using the data set, regress S on SM, SF, ASVAB02, ASVAB03, and ASVAB04 (3 components of the ASVABC composite score).

a. Report your coefficient estimates and standard errors. (You may simply submit your output for this part.)

b. Compare the coefficients and standard errors from part (a) to those from a regression of S on SM, SF, and ASVABC. Explain any differences.

c. Calculate correlation coefficients for the three ASVAB components.

b) Regress the logarithm of earnings on S and EXP. (You will need to create the new variable log(EARNINGS).) Interpret the regression results.

c) Assume that ASVABC is a measure of a person's ability that we expect to be positively correlated with S.

a. Regress S on ASVABC and SM. Interpret the coefficients and comment on their statistical significance.

b. Regress S on ASVABC only. Interpret the slope coefficient and comment on the statistical significance.

c. Regress S on SM only. Interpret the slope coefficient and comment on the statistical significance.

d. Compare the coefficients of ASVABC in the regressions from parts (a) and (b). Give mathematical and intuitive explanations of direction of the change.

e. Compare

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