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Multiple Regression Analysis 5. (7 marks) The population regression model under study is: where educt is years of schooling for the t'th working person sibst is number of siblings for the t'th working person meduct is mother's years of schooling for the t'th working person feduct is father's years of schooling for the t'th working person. i What are the probable signs of B1, P2 and ß3? Explain ii Using the data in wage2, the following equations were estimated: educt 10.364 - 0.094sibst + 0.131meduct 0.210feduct n-722, R2-0.214 Carefully interpret the estimated coefficients on meduc and feduc If Person A has three siblings and his mother and father each have 12 years of education, whereas Person B has no siblings and his mother and father each have 10 years of education. What is the predicted difference in years of education between Person A and Person B? Which factor has more impact on a person's education: parents' education or the number of siblings? iv iii Would you say sibs, meduc, and feduc explain much of the variation in educ? What other factors might affect a person's education'?

Answer 1

i)
sign of b1 should be negative
if there are more sibling , then year of schooling may decrease because on average income is same
so if more siblings then parents may not afford to send all to school
b2 and b3 should be positive
as more educated parents are, more likely the years of schooling of children will be

ii)
meduc = 0.131
it means on average when mother's year of school is 1 higher then children children years of schooling
will be 0.131 higher

similarly for father, it will be 0.210 year higher

iii)

educA - educ B = (-0.094 * (3 - 0)) + 0.131 (12 - 10) + 0.210 * (12 - 10)
= 0.4

parents education has more impact than number of siblings

iv)
here R^2 = 0.214
which means only 21.4% of variation is explained

other factors which may affect is parents income

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