Consider a Situation Where Economic Theory Suggests That You Impose

question 20

Essay

Consider a situation where economic theory suggests that you impose certain restrictions on your estimated multiple regression function. These may involve the equality of parameters, such as the returns to education and on the job training in earnings functions, or the sum of coefficients, such as constant returns to scale in a production function. To test the validity of your restrictions, you have your statistical package calculate the corresponding F-statistic. Find the critical value from the F-distribution at the 5% and 1% level, and comment whether or not you will reject the null hypothesis in each of the following cases.
(a)number of observations: 152; number of restrictions: 3; F-statistic: 3.21
(b)number of observations: 1,732; number of restrictions:7; F-statistic: 4.92
(c)number of observations: 63; number of restrictions: 1; F-statistic: 2.47
(d)number of observations: 4,000; number of restrictions: 5; F-statistic: 1.82
(e)Explain why you can use the F_q,∞ distribution to compute the critical values in (a)-(d).

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