Microsoft Word - EC655 Practice Questions.docx EC655 Practice Questions Fall 2020 1) In an influential paper relating log weekly wages (LWKLYWGE) to years of schooling (EDUC), Angrist and Krueger...

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Microsoft Word - EC655 Practice Questions.docx EC655 Practice Questions Fall 2020 1) In an influential paper relating log weekly wages (LWKLYWGE) to years of schooling (EDUC), Angrist and Krueger (1991) instrumented years of schooling with a person’s quarter of birth. The idea behind the instrument is that people born in first quarter of the year will have fewer years of total schooling because they reach the legal school exit age before students born later in the year. As the excluded instruments in the regression, the authors created three quarter of birth dummy variables (QTR1, QTR2, QTR3) and then interacted them with a set of dummy variables for a person’s year of birth (Y20, Y21, …, Y29), for a total of 30 excluded instruments (the uninteracted year dummy variables are included instruments). A replication of their two-stage least squares results is below, which includes the first stage, second stage, and several additional statistics. Comment on their results. . ivreg2 LWKLYWGE YR20-YR28 (EDUC = QTR120-QTR129 QTR220-QTR229 QTR320-QTR329), ffirst robust first First-stage regressions ----------------------- First-stage regression of EDUC: Statistics robust to heteroskedasticity Number of obs = 329509 ------------------------------------------------------------------------------ | Robust EDUC | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- QTR120 | -.3442705 .0534123 -6.45 0.000 -.448957 -.239584 QTR121 | -.0716851 .0548709 -1.31 0.191 -.1792305 .0358603 QTR122 | -.1931804 .0534868 -3.61 0.000 -.298013 -.0883478 QTR123 | -.0190774 .0542061 -0.35 0.725 -.1253198 .087165 QTR124 | -.1506055 .0522972 -2.88 0.004 -.2531065 -.0481044 QTR125 | -.1687325 .0517645 -3.26 0.001 -.2701894 -.0672756 QTR126 | -.1849731 .0496409 -3.73 0.000 -.2822679 -.0876783 QTR127 | -.1386865 .0490588 -2.83 0.005 -.2348403 -.0425328 QTR128 | -.0914545 .0478477 -1.91 0.056 -.1852345 .0023255 QTR129 | -.1135405 .0470246 -2.41 0.016 -.2057074 -.0213736 QTR220 | -.1962572 .0536482 -3.66 0.000 -.3014061 -.0911083 QTR221 | -.0810742 .0549315 -1.48 0.140 -.1887383 .0265899 QTR222 | -.1175128 .0545118 -2.16 0.031 -.2243543 -.0106713 QTR223 | -.0575606 .0542998 -1.06 0.289 -.1639866 .0488654 QTR224 | -.0699011 .0528258 -1.32 0.186 -.1734382 .0336361 QTR225 | -.0227135 .0516392 -0.44 0.660 -.1239249 .0784979 QTR226 | -.1169389 .0504503 -2.32 0.020 -.2158201 -.0180578 QTR227 | -.1269337 .049604 -2.56 0.010 -.2241561 -.0297113 QTR228 | -.0224683 .0480625 -0.47 0.640 -.1166695 .0717328 QTR229 | -.1031304 .0477828 -2.16 0.031 -.1967833 -.0094776 QTR320 | -.1328158 .0525736 -2.53 0.012 -.2358586 -.029773 QTR321 | .0745972 .0540456 1.38 0.168 -.0313305 .180525 QTR322 | -.0666616 .0526216 -1.27 0.205 -.1697985 .0364753 QTR323 | .0616844 .0537361 1.15 0.251 -.0436369 .1670056 QTR324 | -.0898202 .0511066 -1.76 0.079 -.1899876 .0103472 QTR325 | .0417119 .0497955 0.84 0.402 -.0558858 .1393097 QTR326 | -.0417812 .0492685 -0.85 0.396 -.1383461 .0547836 QTR327 | -.0088095 .046837 -0.19 0.851 -.1006086 .0829897 QTR328 | -.0435773 .0464241 -0.94 0.348 -.1345671 .0474125 QTR329 | -.1272695 .04563 -2.79 0.005 -.216703 -.037836 YR20 | -.4918535 .0503386 -9.77 0.000 -.5905157 -.3931913 YR21 | -.5044095 .0508208 -9.93 0.000 -.6040167 -.4048022 YR22 | -.3894175 .0502549 -7.75 0.000 -.4879157 -.2909192 YR23 | -.4242616 .0505811 -8.39 0.000 -.5233991 -.325124 YR24 | -.3186606 .0490182 -6.50 0.000 -.4147349 -.2225864 YR25 | -.2968897 .0490335 -6.05 0.000 -.3929941 -.2007854 YR26 | -.1885139 .0480755 -3.92 0.000 -.2827406 -.0942873 YR27 | -.1455474 .0474243 -3.07 0.002 -.2384977 -.0525971 YR28 | -.0863974 .0470893 -1.83 0.067 -.1786912 .0058963 _cons | 13.11653 .0331067 396.19 0.000 13.05164 13.18142 ------------------------------------------------------------------------------ F test of excluded instruments: F( 30,329469) = 4.80 Prob > F = 0.0000 Sanderson-Windmeijer multivariate F test of excluded instruments: F( 30,329469) = 4.80 Prob > F = 0.0000 Summary results for first-stage regressions ------------------------------------------- (Underid) (Weak id) Variable | F( 30,329469) P-val | SW Chi-sq( 30) P-val | SW F( 30,329469) EDUC | 4.80 0.0000 | 144.04 0.0000 | 4.80 NB: first-stage test statistics heteroskedasticity-robust Stock-Yogo weak ID F test critical values for single endogenous regressor: