Question

when an answer for this assignment comes up?

4. Consider the following wage equation for individual workers (2) log(wage-As + β,educ + Aexper + β3tenure + u, exper B3tenure +u, where you think that the conditional variance of log(wage) (which is the same as the conditional variance of the error term ) does not depend on educ, exper, or tenure. However, you are worried that the variance of log(wage) differs across the four demographic groups of married males, married females, single males, and single females a) W b) What are the degrees of freedom in the F-test? hat regression would you run to test for heteroscedasticity?

Answer 1

a)

To test for heteroskedasticity, plot a scatterplot of Residual vs. Fitted Values. If we see a funnel shape pattern, it suggests your data is suffering from heteroskedasticity, i.e. the error terms have non-constant variance

b)

In F Table

Degrees of Freedom _Total = n – 1 where n is the number of observations in the dataset

Degrees of Freedom _Regression = 3 since there are 3 independent variables

Degrees of Freedom _Residual = Degrees of Freedom _{Total ­­}- Degrees of Freedom _Regression