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This assignment requires the preparation of a report and you are free to present this in whatever way you feel best demonstrates your understanding of the work undertaken.

INSTRUCTIONS TO CANDIDATES
ANSWER ALL QUESTIONS

Assignment – 2 ( Econometrics)

1. This assignment requires the preparation of a report and you are free to present this in whatever way you feel best demonstrates your understanding of the work undertaken.

2. Screenshots of EViews results must be provided. 

3. Handwriting scripts will NOT be accepted. MS word should be used with the word limit of 2000. 

4. Note that the provision of results is only part of what is required as full and detailed discussions are important. Weightage of assignment is 50 percent of internals. Submission deadline: 8th  June.

The dataset “2021-22 Assignment.wf1” is an EViews workfile. It contains a sample of cross-sectional data with 20 observations from a survey collected in the UK in 2020. It contains information about hourly wage (hwage, measured in £), years of schooling (school), and years of work experience (exper). 

Prepare a report to explain the impact of education on income, based on the requirements below. 

Part A: Estimate the impact of years of schooling on hourly wage with an OLS estimation on the following model,

β„Žπ‘€π‘Žπ‘”π‘’π‘– = 𝛽0 + 𝛽1 βˆ™ π‘ π‘β„Žπ‘œπ‘œπ‘™π‘– + 𝑒𝑖     ---- (A)

The following points should be discussed. 

• Explain expected values of hourly wage and years of schooling and explain standard deviations of hourly wage and years of schooling. 

• Plot hourly wage against years of schooling using eviews.

• Estimate the model using EViews.

• Derive the estimates, 𝛽̂0 and 𝛽̂ 1, using data directly/excel or any other, rather than using EViews.

• Interpret the estimates, 𝛽̂ 0 and 𝛽̂ 1, and discuss the significance

Part B : 

Additional variable, years of work experience, is now available. Estimate the impact of education and experience on hourly wage with an OLS estimation on the following model,

β„Žπ‘€π‘Žπ‘”π‘’π‘– = 𝛽0 + 𝛽1 βˆ™ π‘ π‘β„Žπ‘œπ‘œπ‘™π‘– + 𝛽2 βˆ™ 𝑒π‘₯π‘π‘’π‘Ÿπ‘– + 𝑒𝑖 --------- (B)

 The following points should be discussed. 

• Estimate the model using EViews  and Explain the F test and discuss the overall significance of the model.  

• Compare the estimate 𝛽̃ 1 from model B with the estimate 𝛽̂ 1 from model A. Explain the cause for the difference

• Test the statement that “An additional year of schooling increased hourly wage by £0.45.”

 • Test the statement that “An additional year of schooling and an additional year of experience have the same impacts on hourly wage.

 

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