Please help me with this problem and show the steps. Thank you! A researcher wan
ID: 3339821 • Letter: P
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Please help me with this problem and show the steps. Thank you!
A researcher wants to investigate the relationship between the annual income of a father (FIi) and the annual income of his oldest child (CIi) measured in thousands of dollars. Having collected that data on FIi, CI, their age differences (ADi), and the gender of the child (G 1 if the child is a daughter and zero otherwise). The researcher estimates the following regressions assuming homoskedasticity: Cli 3.62+0.325 Flit 2.1 In(AD) (0.2) (0.014) = (0.36) In (CI,) 0.23 + 0.0047FL + 0.35 In (AD)-0.56G (0.19) (0.002) = (0.71) (0.06) CI4.030.25 FI 2.3 In (AD)- 0.14G - 0.10FI x G (0.19) (0.003) (0.14) (0.34) (0.12) P-values are provided in the parentheses. The dataset contains 500 observations. The R2's of the first, second, and third regressions are 0.25, 0.18, and 0.26, respectively. Answer the following questions (a) What is the interpretation for the coefficient on FIi in regressions (1) and (2)? (b) What is the interpretation for the coefficient on FIi in regression (3)? (c) what is the interpretation for the coefficient on F× Gi in regression (3)? (d) What is the interpretation for the coefficient on In(ADi) in regressions (1) and (2)? (e) Test at the 5% significance level the null hypothesis that gender has no effect on the child's income in regression specification (2) (f) Test at the 5% significance level the null hypothesis that gender has no effect on the child's income in regression specification (3)Explanation / Answer
(a) If annual income of father increases by one unit, annual income of oldest child increases by 0.325 units
If annual income of father increases by one unit, ln of annual income of oldest child increases by 0.0047units
(b) If annual income of father increases by one unit, annual income of oldest child increases by 0.25 units
(c) If annual income of father increases by one unit, and gender Gi =1 that is daughter, annual income of oldest child decreases by 0.10 units
(d) If ln(Adi) that is if, ln of age differnces increases by one unit, annual income of oldest child increases by 2.1 units
If ln(Adi) that is if, ln of age differnces increases by one unit, ln of annual income of oldest child increases by 0.35 units
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