Assignment:
1. Use the accompanying dataset to answer this question ("Question 1" sheet in "Problem Set 3 data.xlsx"). The unemployment rate is the annual average for 2013. The "percent welfare dept hh" variable is the percent of households that receive some form of welfare-based income in that county (from the American Community Survey), 2011-2015.
a) Estimate a linear regression where the unemployment rate is the independent variable and percentage of households that are welfare dependent is the dependent variable. Test the significance of the "unemployment" coefficient at alpha=0.01 and report your findings. For full credit, be sure to show all steps in your work.
b) Interpret the "unemployment coefficient" you found in part a: how much is a 1 -percentage point increase in unemployment predicted to change the percentage of households that are welfare dependent?
c) Does your result make sense from an economic standpoint? Explain in 2 to 3 sentences.
2. The following question is inspired by the Baker and Bernstein reading. Use the accompanying dataset to answer it ("Question 2" sheet in "Problem set 3 data.xlsx"). The data come from the Federal Reserve Economic Database.
a) Fill in column D by calculating "Unemployment Rate - NAIRU". (Hint: in cell D2, type "=B2-C2", then copy and paste your formula through the rest of the rows.) What is the median of this variable? Interpret in 2 to 3 sentences what this means about whether we have more often been above or below full employment since 1964.
b) Calculate the correlation between the Unemployment Rate-NAIRU gap (i.e., what you calculated in column D) and average weekly hours of production and non-supervisory employees (the variable in column E). Report the correlation coefficient, and report whether it is significant at the 95% confidence level. Explain how you arrived at your answer in 2 to 3 sentences.
c) Explain whether your results are consistent with what Baker and Bernstein argue of Getting Back to Full Employment about the relationship between the strength of the labor market and the ability of workers to successfully demand more hours. Limit your response to 4 to 5 sentences.
Attachment:- Nonsupervisory Employees.rar