Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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I need help with the one that says Model Legibility. Would this be the zero Conditional mean? 

9:31
5GUC .lll 84%
Bo+B1 24
ẞo 16
βο
Treatment Group
57 Bo+B1+ B2+ ẞ3
Counterfactual
Bo+ B1+ B2
Comparison Group
37 Bo+ B2
Pre-intervention
Post-intervention
Model Legibility
With the information provided, which Guass-Markov
assumption would this most closely resemble, explain.
Assumption FO (Firm-pay Orthogonality)
E(Eit j(it),t) = = 0
(8)
Regression Results
Circle all the statistically significant results, and cross out all
the insignificant results.
Table 1: Impact of Income on Consumption by Assets and Race
Dependent Variable: A Log Non Durable Consumption
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
A Log Income
0.075
0.057
0.214
0.163
0.258
(0.004)
(0.003)
(0.017)
(0.011)
(0.019)
0.220
(0.013)
0.268
0.252
(0.020)
(0.015)
(A Log Income) x Black
0.048
(0.003)
0.175
(0.031)
0.102
(0.026)
0.010
(0.023)
(A Log Income) x Hispanic
0.023
(0.003)
0.127
(0.021)
0.096
0.029
(0.019)
(0.017)
(A Log Income) x Checking
-0.440
-0.101
(0.039)
(0.032)
(A Log Income) x Liquid (Imputed)
-0.176
(0.046)
-0.448
(0.036)
OLS/IV
OLS
Black and Hispanic Dummies
Asset Rank Control
OLS
Yes
TV
TV
TV
IV
TV
Yes
Yes
TV
Yes
Observations
Adjusted R2
25,774,028
0.004
0.004
25,774,028 20,095,173
-0.001
Yes
20,095,473 20,095,473
-0.004
-0.006
Yes
Yes
Yes
20,095,173 20,095,173
-0.008
-0.008
20,095,473
-0.008
Note: This table shows estimates of the elasticity of consumption with respect to income (9). Columns (1) and (2) show OLS estimates of the effect of income
on consumption using equations (1) and (2) respectively. Columns (3)-(8) show IV estimates using equations (7) and (6). Standard errors are clustered at the
firm level. Columns (5) and (6) control for a narrow measure of assets: chocking account balance. Asset variables are parameterized as AssetRank/N - 0.5, so
the variable is scaled from -0.5 for the lowest asset household to 0.5 for the highest asset household. Columns (7) and (8) control for liquid assets. Liquid assets
are imputed using checking account balance and race. The IV specifications control for five lags of the change in coworker pay. See Section 3.7 for details.
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Transcribed Image Text:9:31 5GUC .lll 84% Bo+B1 24 ẞo 16 βο Treatment Group 57 Bo+B1+ B2+ ẞ3 Counterfactual Bo+ B1+ B2 Comparison Group 37 Bo+ B2 Pre-intervention Post-intervention Model Legibility With the information provided, which Guass-Markov assumption would this most closely resemble, explain. Assumption FO (Firm-pay Orthogonality) E(Eit j(it),t) = = 0 (8) Regression Results Circle all the statistically significant results, and cross out all the insignificant results. Table 1: Impact of Income on Consumption by Assets and Race Dependent Variable: A Log Non Durable Consumption (1) (2) (3) (4) (5) (6) (7) (8) A Log Income 0.075 0.057 0.214 0.163 0.258 (0.004) (0.003) (0.017) (0.011) (0.019) 0.220 (0.013) 0.268 0.252 (0.020) (0.015) (A Log Income) x Black 0.048 (0.003) 0.175 (0.031) 0.102 (0.026) 0.010 (0.023) (A Log Income) x Hispanic 0.023 (0.003) 0.127 (0.021) 0.096 0.029 (0.019) (0.017) (A Log Income) x Checking -0.440 -0.101 (0.039) (0.032) (A Log Income) x Liquid (Imputed) -0.176 (0.046) -0.448 (0.036) OLS/IV OLS Black and Hispanic Dummies Asset Rank Control OLS Yes TV TV TV IV TV Yes Yes TV Yes Observations Adjusted R2 25,774,028 0.004 0.004 25,774,028 20,095,173 -0.001 Yes 20,095,473 20,095,473 -0.004 -0.006 Yes Yes Yes 20,095,173 20,095,173 -0.008 -0.008 20,095,473 -0.008 Note: This table shows estimates of the elasticity of consumption with respect to income (9). Columns (1) and (2) show OLS estimates of the effect of income on consumption using equations (1) and (2) respectively. Columns (3)-(8) show IV estimates using equations (7) and (6). Standard errors are clustered at the firm level. Columns (5) and (6) control for a narrow measure of assets: chocking account balance. Asset variables are parameterized as AssetRank/N - 0.5, so the variable is scaled from -0.5 for the lowest asset household to 0.5 for the highest asset household. Columns (7) and (8) control for liquid assets. Liquid assets are imputed using checking account balance and race. The IV specifications control for five lags of the change in coworker pay. See Section 3.7 for details.
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