Question

In: Statistics and Probability

Consider the following model to estimate the effects of several variables, including cigarette smoking, on the...

Consider the following model to estimate the effects of several variables, including cigarette smoking, on the weight of newborns:

log(bwght) = β0 + β1male + β2parity + β3log(faminc) + β4packs + u

where male is a binary indicator equal to one if the child is male; parity is the birth order of this child; faminc is family income; and packs is the average number of packs of cigarettes smoked per day during pregnancy.

(i) Why might you expect packs to be endogenous?

( ) There may be observed health factors uncorrelated with smoking behavior that affect infant birth weight.

( ) There may be unobserved health factors correlated with smoking behavior that affect infant birth weight.

( ) There may be observed health factors correlated with smoking behavior that affect infant birth weight.

( ) There may be unobserved health factors uncorrelated with smoking behavior that affect infant birth weight.

(ii) Use the data in BWGHT.dta to estimate the structural equation. First, use OLS. Then, use 2SLS, where cigprice is an instrument for packs.

The difference between OLS and 2SLS in the estimated effect of packs on bwght is huge. ANSWER: _________ (TRUE or FALSE)

With the OLS estimate, one more pack of cigarettes is estimated to reduce bwght by about _______ % and _________ (IS or IS NOT) statistically significant.

The 2SLS has the ____________ (SAME or OPPOSITE) sign, is ________ (HUGE or SMALL) in magnitude, and _________ (IS or IS NOT) statistically significant.

(iii) Estimate the reduced form for packs. The reduced form estimates show that cigprice does not significantly affect packs is _________ (TRUE or FALSE)

(iv) What do you conclude about identification of the structural equation using cigprice as an instrument for packs?

( ) Variable cigprice fails as an IV for packs because cigprice is partially correlated with packs.

( ) Variable cigprice does not fail as an IV for packs because cigprice is partially correlated with packs.

( ) Variable cigprice fails as an IV for packs because cigprice is not partially correlated with packs.

( ) Variable cigprice does not fail as an IV for packs because cigprice is not partially correlated with packs.

Expert Solution

(i) There may be unobserved health factors correlated with smoking behavior that affect infant birth weight.

There may be women smokers who may also be involved in other activities like drinking coffee or eating less nutritious food or consume alcohol which can impact on infant birth weight.

(ii) The difference between OLS and 2SLS in the estimated effect of packs on bwght is huge. ANSWER: TRUE

With the OLS estimate, one more pack of cigarettes is estimated to reduce bwght by about 8.4 % and IS statistically significant.

The 2SLS has the OPPOSITE sign, is HUGE in magnitude, and IS NOT statistically significant.

(iii) The reduced form estimates show that cigprice does not significantly affect packs is TRUE.

(iv) Variable cigprice fails as an IV for packs because cigprice is not partially correlated with packs.

orchestra answered 1 year ago

In class we talked about the effects of cigarette smoking on birthweight. We defined a model...

In class we talked about the effects of cigarette smoking on birthweight. We defined a model E ( O | C = c ) = (β0)^1 + ((β1)^1 x c) where O is birthweight in ounces and C is cigarettes smoked per day. Suppose instead we used the model E(L|P =p)=(β0)^2 +((β1)^2 x p) where L is birthweight in pounds and P is packs of cigarettes smoked per day (there are 20 cigarettes in a pack). What is the relationship...

Describe the effects and symptoms of the following diseases linked to cigarette smoking: Chronic bronchitis: Emphysema:...

Describe the effects and symptoms of the following diseases linked to cigarette smoking: Chronic bronchitis: Emphysema: Lung cancer: 2. What effects does smoking during pregnancy have on the fetus?

Cigarette packages and advertisements have included warning labels for several years, but the Family Smoking Prevention...

Cigarette packages and advertisements have included warning labels for several years, but the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) signed into law in 2009 required that stronger and more graphic health warnings appear on cigarette packages by 2012. In 2011, the Food and Drug Administration proposed nine new textual warning statements that were much stronger than previous warning statements. The new warning statements included words such as “Cigarettes are addictive,” “Cigarettes cause cancer,” and “Tobacco smoke...

What is the role of control variables in a fixed-effects model?

You estimate a model with 9 explanatory variables and an intercept from a data set with...

You estimate a model with 9 explanatory variables and an intercept from a data set with 100 observations. To test hypotheses on this model you should use a t-distribution with how many degrees of freedom? Select one: a. 1 b. 10 c. 9 d. 90

When we estimate a linear multiple regression model (including a linear simple regression model), it appears...

When we estimate a linear multiple regression model (including a linear simple regression model), it appears that the calculation of the coefficient of determination, R2, for this model can be accomplished by using the squared sample correlation coefficient between the original values and the predicted values of the dependent variable of this model. Is this statement true? If yes, why? If not, why not? Please use either matrix algebra or algebra to support your reasoning.

An American consumer organization is currently examining the relationship among several variables including gasoline mileage as...

An American consumer organization is currently examining the relationship among several variables including gasoline mileage as measured by miles per gallon; the horsepower of the car’s engine and the weight of the car (in pounds). A sample of 50 recent car models was selected and the results recorded. (provided in auto.xlxs) (a) Using the sample data attached, calculate the sample mean and standard deviation for the variables: - 1. Miles per gallon (MPG) 2. Horsepower 3. Weight (in pounds) (b)...

You must consider several issues when you are thinking of selling overseas, including the following: Should...

You must consider several issues when you are thinking of selling overseas, including the following: Should your company modify its domestic-market product for sale abroad? Should it develop a new product for the foreign market? Please discuss.

Consider the following data for two variables, and

Consider the following data for two variables, and . 7 30 21 18 25 10 27 23 16 21 a. Develop an estimated regression equation for the data of the form . Comment on the adequacy of this equation for predicting . Enter negative value as negative number. The regression equation is s= (to 3 decimals) R2= % (to 1 decimal) R Adjusted= % (to 1 decimal) Analysis of Variance SOURCE DF SS(to 2...

Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data.

Quarter Year 1 Year 2 Year 3 1 3 6 8 2 2 4 8 3 4 7 9 4 6 9 11 (b) Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise. If required, round your answers to three decimal places. For...