ECN224 Econometrics 1 - 2018 Past Paper Questions and Answers

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ECN224 Econometrics 1 – 2018
Questions and Answers

, FOR MORE HIGH-QUALITY PAST PAPER MODEL ANSWERS, ONLINE TUTORING AND
ECONOMICS HELP, visit LondonEconomicsTutors.co.uk.
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(a)

The coefficient of UKBORN estimates the impact that being born in the UK has on wage, measuring
the percentage change in the level of wage. This indicates that on average, and all else being held
constant, people who are born in the UK have a wage which is 4.2% higher than those not born in
the UK.

To determine whether the difference between the coefficient on ukborn is statistically significant,
we perform the following two-sided hypothesis test:

𝐻 :𝛽 = 0
𝐻 :𝛽 ≠ 0
The test statistic is:

𝛽
𝑡 =
𝑆𝐸(𝛽 )
Plugging in the values from the regression output:
0.042
𝑡 = = 3.066
0.0137
We then compare the value of the t-statistic to the associated critical values. Here, we can reject the
null at a 5% significance level if the absolute value of the t-statistic is significantly greater than 1.96.
In this case, the t statistic is significantly greater than 1.96, and therefore we can reject the null