Empirical Problem
Use the dataset "psid.txt" to do the following:
1. Look at the variables given and analyze one by one whether they can be used to explain the wages of the household head. If you think you need to create new variables (e.g. interaction dummies), do it.
TIP: Be careful with the direction of causality! Think about it. In this problem you are trying to explain which things affect the wages, not which things are affected by the wages.
E.g.: you get a brain freeze because you ate ice cream too fast. Therefore eating ice cream fast explains the brain freeze. It would be wrong to say that you can explain eating ice cream too fast because of the brain freeze.
2. Do a linear regression on the wage of the household head using the variables you chose previously and analyze the coefficients. Are they significant? Do they point to the direction that you expected?
Description of the Data
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Variable
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I Description (actual number if not described) I
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2005 Family ID number
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Month of Interview
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Day of Interview
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Year of Interview
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Length of Interview
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Age of Household Head
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Sex of Household Head
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1 Male, 2 Female
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Race of Household Head
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1 White, 2 Black
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Household Head Marital Status
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1 Married, 2 Never Married, 3 Widowed, 4 Divorced, 5 Separated
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Whether the Household Head Got a High School Degree
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0 no, 1 yes
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Whether the Household head Attended College
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0 no, 1 yes
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Whether the Household Head Got a College Degree
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0 no, 1 yes
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Wages of the Household Head
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Hours of Housework of the Household Head
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Whether the Household Head Belongs to a Union
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0 no, 1 yes
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Amount Given as Child Support by the Household Head
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Religious Preference of the Household Head
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0 Atheist, 1 Catholic, 2 Jewish, 8 Protestant 10 Other non-Christian, 13 Orthodox
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Age of Wife
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Race of Wife
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1 White, 2 Black
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Whether the Wife Cot a High School Degree
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0 no, 1 yes
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Whether the Wife Attended College
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0 no, 1 yes
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Whether the Wife Cot a College Degree
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0 no, 1 yes
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Wages of the Wife
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Hours of Housework of the Wife
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Amount Given as Child Support by the Wife
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Religious Preference of the Wife
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0 Atheist, 1 Catholic, 2 Jewish, 8 Protestant 10 Other non-Christian, 13 Orthodox
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Number of Children in the Household
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Whether the Household Head Owns or Rents the House
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1 Owns, 5 Rents, 8 Neither Owns or Rents
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Value of the House
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Number of Vehicles
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Attachment:- psid.txt.zip