Due by 5/15
There are two sets of questions. Make sure to present your estimation results using the R
The data set 401ksubs.RData contains information on net financial wealth (nettfa), age of
survey respondent (age), annual family income (inv), family size (fsize), a binary variable
for eligibility in a 401(k) plan (e401k), participation in certain pension plans for people in
the United States and other variables. The wealth and income variables are both recorded in
thousands of dollars.
**Use only the data for single-person households, i.e., fsize=1 to answer the questions in
1. How many single-person households are there in the data set?
2. Use OLS to estimate the model
nettf ai = ß0 + ß1inci + ß2agei + ui (1)
and interpret the slope coefficients. Is there any sign contrary to your expectation?
3. Does the intercept from the regression have an interesting meaning? Explain.
4. Find the p-value for the test H0 : ß2 = 1 against H1 : ß2
1% significance level?
5. What is the youngest age of people in this sample? How many people are at that age?
6. Use OLS to estimate the the model
nettf ai = ß0 + ß1inci + ß2agei + ß3age2
i + ui
Are you concerned that the coefficient on age is negative? Explain.
7. Because the youngest people in the sample are 25, it makes sense to think that, for
a given level of income, the lowest average amount of net total financial assets is at
age 25. Recall that the partial effect of age on nettfa is ß2 + 2ß3age, so the partial
effect at age 25 is ß2 + 2ß3(25) = ß2 + 50ß3; call this ?2. Find ?b2 and obtain the
two-sided p-value for testing H0 : ?2 = 0. You should conclude that ?b2 is small and
very statistically insignificant. [Hint: One way to do this is to estimate the model
nettf a = a0 + ß1inc + ?2age + ß3(age – 25)2 + u, where the intercept, a0, is different
from ß0. There are other ways, too.]
8. Because the evidence against H0 : ?2 = 0 is very weak, set it to zero an estimate the
nettf ai = a0 + ß1inci + ß3(agei – 25)2 + ui
In terms of goodness-of-fit, does this model fit better than that the model in (2)?
9. For the estimated equation in (3), set inc = 30 and graph the relationship between
nettfa and age, but only for age = 25. Describe your finding.
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlinesOrder Paper Now