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Question : 12.3 A study tried to find the determinants of the : 2806

12.3 A study tried to find the determinants of the increase in the number of households headed by a female. Using 1940 and 1960 historical census data. a logit model was estimated to predict whether a woman is the head of a household ving on her own) or whether she is living within another's household. The limited dependent variable takes on a value of l if the female lives on her own and is 0 if she shares housing. The results for 1960 using 6.05 observations on prime-age whites and 1.294 on nonwhites were as shown in the accompanying table: Regression (1) White (2) Nonwhite Regression Model Logit Constant 1.459 2.874 (0.685) 1.423 Age 0.275 0.084 (0.068) (0.037) Age squared 0.00463 0.0002 (0,00044) (0.0008 Education (0,026) 0.038) Farm Status 0.687 0.498 (0.1730 0.346) South 0.376 0.520 (0,098) 0.180) Expected Family Earnings 0,0018 0.001 (0.000190 (0.00024) Family Composition 4.123 2.75 (0.294) (0.345) Pseudo-R2 0.266 Percent Correctly Predicted 82.0 83.4 where Age is measured in years. Educarion is years of schooling of the family head. Fann status is a binary variable taking the value of one if the family head lived on a farm, South sa binary variable for living in a region of the country, family earnings was generated from a separate OLS regression to predict earnings from a set of regressors, and Family composition refers to the number of family members under the age of 18 divided by the total number in the family. The mean values for the variables were as shown in the next lable. Variable (1) White Mean (2) Nonwhite Mean Age 46.1 42.9 Age squared 2,263.5 1,965.6 Education 2.6 04 Farm status 0,03 0.02 South 0.3 0.5 Expected family earnings 2,336.4 507.3 Family composition a. Interpret the results. Do the coefficients have the expected signs?

Why do you think age was entered both in levels and in squares?

b. Calculate the difference in the predicted probability between whites and non- whites and the sample mean values of the explanatory variables.

Why do you think the study did not combine the observations and allow for a nonwhite binary variable to enter?