the E(0) the World Development (ebruary 1998er to of street vendors in the city

Question

the E(0) the World Development (ebruary 1998er to of street vendors in the city of Puebla study ico. Recall that the vendors' order fMe mean annual earnings, E (y), was modeled andhoursworked (x2) The data for the study are reproduced in the table 16 Earnings of Mexican street vendors in n order imodeled as afirs. unction of STREETVEN HOURS WORKED PER DAY, 2 ANNUAL NUMBER EARNINGS, y AGE, x1 $2841 1876 2934 1552 3065 3670 2005 3215 1930 2010 3111 2882 1683 1817 4066 VENDOR 29 62 184 263 281 354 401 515 633 677 710 800 914 70 20 29 Source: Adapted from Smith, P. A., and Metzger, M.e The return to education: Street vendors in ico," World Development, Vol. 26, No. 2, F pp. 289-296. ise 16

Explanation / Answer

Part d

We would use the t test for checking the hypothesis whether the coefficient of the second order are statistically significant or not. If the coefficients are not statistically significant, then the second order terms are not necessary for prediction of the annual earning.

Part e

Here, we have to use t test for regression coefficients.

For variable age, t test is given as below:

H0: 11 = 0 versus Ha: 11 0

This is a two tailed test.

Let us assume = 0.05 for this hypothesis test.

Test statistic formula is given as below:

t = 11 / SE(11)

We are given

11 = -1.5710

SE(11) = 0.6911

t = -1.5710/0.6911 = -2.27319

P-value = 0.049

P-value < = 0.05

So, we reject the null hypothesis that coefficient for second order of variable age is not statistically significant.

There is sufficient evidence to conclude that coefficient for second order of variable age is statistically significant.

Now, we have to test the significance of second order of the term hours.

t = 11 / SE(11)

t = 8.08/26.73 = 0.30

P-value = 0.769

P-value > = 0.05

So, we do not reject the null hypothesis that coefficient for second order of variable hour is not statistically significant.

There is insufficient evidence to conclude that coefficient for second order of variable hour is statistically significant.

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