Consider the following simple linear probability model for the likelihood of bei
ID: 1230849 • Letter: C
Question
Consider the following simple linear probability model for the likelihood of being a union member: Union = beta 0 + beta 1 experience,+ beta 2 experience 2 + beta 2 grade + beta 2 married + beta 2 High + epsilon 1 Where: Union: binary variable that equals 1 If the worker Is a onion member, 0 otherwise Experience-, number of years the worker has been In the labor force. Grade: number of years of schooling completed. Married: a dummy variable that equals 1 if the worker is married, 0 otherwise. High: a dummy variable that equals 1 if the worker is in a 'highly unionized industry, 0 otherwise.Explanation / Answer
Value of F-statistic from table fF(5,994) at 5% significance level is less then 3.48 Here the value of F-statistic F(5,994)=18.17 therefore Fcomputed>Ftable therefore the model is statistically significant and we reject the null hypothesis. also the value of adjusted R2 is 0.0791. That means only 7.91% of variation in the dependent variable i.e. union is explained by the model. Also from the probability values of the coefficienst of the variables we can find out that, at 5% level of significance all the coefficients are statistically significantly different from zero except the coefficient of married whose prob value is 0.657 and also the constant whose prob value is 0.173 hence the variable married has no influence on the dependent variable.. also if we go for 1% level of significance we find that except married and constant grade also becomes statistically insignificant. for 10% also married and constant grade also remains statistically insignificant whereas others statistically significant.