ECON2206/3290 Introductory Econometrics Assignment 1 Due Week 5 [Total 10 points including 1 point for presentation] To investigate whether fast‐food restaurants charge higher prices in areas with a larger concentration of blacks, you obtain ZIP‐level data on prices for various items at fast‐food restaurants, along with characteristics of the zip code population, in two US cities New Jersey and Pennsylvania. The data set is in DISCRIM.RAW which can be found on Blackboard in the course website. (a) [1 point] Download the description file “discrim.des” and data file “discrim.dta” from the course website and read the descriptions about the data. Find the (i) the units of measurement; (ii) the sample means; and (iii) the sample standard deviations of prpblck and income. (b) [1 point] Consider a model to explain the price of soda, psoda, in terms of the proportion of the population that is black and median income:
psoda 0 1 prpblck 2income
Estimate this model by OLS and report the results in equation form, including the sample size and R‐squared. Interpret the estimated coefficient on prpblck. Would you say the coefficient is economically significant? Why? (c) [1 point] Compare the estimate from part (b) with the simple regression estimate from psoda on prpblck. Is the discrimination effect larger or smaller when you control for income? Why? (d) [1.5 point] A model with a constant price elasticity may be more appropriate. Report estimates of the model
log( psoda ) 0 1 prpblck 2 log(income)
If prpblck increases by .20 (20 percentage points), what is the estimated percentage change in psoda? (e) [1.5 point] Now add the variable prppov to the regression in part (d). What happens to the estimate of 1 ? What do you think is happening? (f) [1 pioint] Find the correlation between log(income) and prppov. Is it roughly what you expected? (g)...
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