Equation (11

question 27

Essay

Equation (11.3)in your textbook presents the regression results for the linear probability model, and equation (11.10)the results for the logit model.
a. Using a spreadsheet program such as Excel, plot the predicted probabilities for being denied a loan for both the linear probability model and the logit model if you are black. (Use a range from 0 to 1 for the P/I Ratio and allow for it to increase by increments of 0.05.)
b. Given the shortcomings of the linear probability model, do you think that it is a reasonable approximation to the logit model?
c. Repeat the exercise using predicted probabilities for whites.

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Definitions:

Socioeconomic Status

A measure of an individual's or family's economic and social position relative to others, based on income, education, and occupation.

PTSD

Posttraumatic Stress Disorder, a mental health condition triggered by experiencing or witnessing a terrifying event, characterized by flashbacks, nightmares, and severe anxiety.

9/11

The date, September 11, 2001, when terrorist attacks occurred in the United States, targeting the World Trade Center in New York City and the Pentagon.

Occupational Segregation

The division of labor by gender, ethnicity, or other characteristics, leading to different groups being channelled into different types of jobs.