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Econometrics: Present results for a hypothetical model and explain how you would interpret your results and...

Econometrics: Present results for a hypothetical model and explain how you would interpret your results and derive conclusions about the population parameters.

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Answer #1

Let Y be number of years of schooling for kids between 8-15 (the dependent variable)

Let X1 be family income and X2​​ be number of years of mother's education - the Xs are our independent variables.

is the error term and includes measurement errors, omitted explanatory variables, random disturbances and effects that cannot be modelled etc.

When family income increases by $1, the number of years of schooling change by units. The other coefficient can be interpreted in a similar manner.

The population parameter Y is the mean number of years of schooling for children between the ages 8 and 15. The population variance would describe the spread of the data or the deviations from the population mean. A higher variance implies more irregularities in the data, whereas lower variance implies the data is bunched closely around the mean.

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