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**
POLS 6482 ADVANCED MULTIVARIATE STATISTICS
Seventh Assignment
Due 22 October 2001**

- This problem is a simple exercise with dummy variables. The data are discussed
on pages VII-2 to VII-8 of the Epple notes. The data file is:

Package Delivery Data

- Replicate the analyses shown in the Epple notes using
**EVIEWS**. Use the @FDIST(_,_,_) command to get the exact P-Value for the test discussed on VII-8.

- In
**EVIEWS**, run the following regression:

**LS mins 1-dum dum delivs**

and compare the results with:

**LS mins C dum delivs**

How are the two different? Why?

- Paste the data into
**STATA**and replicate the analyses in parts (a) and (b). In**STATA**, you can get the p-value with the command (see homework 5):

**display fprob(_,_,_)**

In**STATA**you can suppress the constant (intercept) term with the command:

**regress mins dum2 dum delivs, hascons**

(**dum2**=**1 - dum**)

**hascons**tells**STATA**that the independent variablesTo see the difference, try the command:*incorporate the constant*!

**regress mins dum2 dum delivs, nocons**

- What is the difference between the two outputs?

- Replicate the analyses shown in the Epple notes using
- This problem deals with the awards in wrongful death cases. This dataset is
discussed in Epple Notes VI-36 to VI-41 and VII-10 to VII-14.

Awards in Wrongful Death Court Cases

- Download the dataset and replicate the analyses shown in Epple Notes VI-36 to
VI-40.

- Answer the two questions on VI-40 about a unit change in income and the
slope of the relationship between award and earnings.

- There are several dummy (indicator) variables included in the dataset. With
respect to the regression results shown on page VI-38, what is the omitted category that is
being picked up by the intercept term?

- With respect to (c), re-run the regression with the omitted indicator variable
(don't use
**C**!). Do the coefficients have the correct values?

- Run the
**Ramsey RESET Test**with one, two, and three fitted terms (see Epple Notes VI-13 to VI-16). Do the results make sense to you?

- Perform the four tests discussed on page VII-12 (Q7.2 - Q7.5). Use the
specification with age interacted with earnings. Under the
**View**button on the regression table, select**Representations**and report the results so that your Wald Tests are clearly reported. The Representations command should produce something that looks like this:

With respect to the last test -- whether or not governments, corporations, and small businesses pay the same amount -- discuss its**Estimation Command: ===================== LS AWARD C AGE AREAPI CHILD CORP DATE EARN GOVT JURY SMLBIZ AGE*EARN Estimation Equation: ===================== AWARD = C(1) + C(2)*AGE + C(3)*AREAPI + C(4)*CHILD + C(5)*CORP + C(6)*DATE + C(7)*EARN + C(8)*GOVT + C(9)*JURY + C(10)*SMLBIZ + C(11)*(AGE*EARN) Substituted Coefficients: ===================== AWARD = -219.7246158 - 0.6092463913*AGE + 0.006719394952*AREAPI + 20.42366783*CHILD + 63.02345024*CORP + 12.01049539*DATE + 10.72571602*EARN + 184.5738731*GOVT + 131.2040308*JURY + 67.237274*SMLBIZ - 0.1172755132*(AGE*EARN)**significance.**political**

- Paste the dataset into
**STATA**, define the variables appropriately, and turn in the**d**and**summ**commands. Replicate the regressions and tests discussed in (c) - (f). To perform the Ramsey RESET Test in**STATA**, run the regression and then use the command:

**ovtest**

Note that**STATA**automatically uses three fitted values.

To perform the coefficient tests use the**test**command described in the 5^{th}Homework. For example, to test the null hypothesis that the amount paid by corporations is the same as that paid by small business:

**test corp=smlbiz**

and**STATA**will respond with**( 1) corp - smlbiz = 0.0 F( 1, 161) = 0.02 Prob > F = 0.8900** - Graph the residuals against the fitted values. In
**STATA**, you can do this with the command:

**rvfplot, border yline(0)**

**rvfplot**stands for "residual-versus-fitted plot",**border**draws a line around the graph, and**yline(0)**draws a line across the graph at y = 0.

In**EVIEWS**, to generate the same graph run the regression and then click on the**Forecast**button. You will see:

Click OK and you will see a graph (note that you can turn off that option). Kill the graph and you will see AWARDF as one of the variables in the workfile window. To get the graph use the command

**scat awardf resid**

In**EVIEWS**, try the commands:

**scat(R) awardf resid**

and**scat(R) award awardf**

the "(R)" puts in a regression line. What is your interpretation of these two graphs?

- Download the dataset and replicate the analyses shown in Epple Notes VI-36 to
VI-40.