In April 2008 the unemployment rate in the United States stood at 5.0%. By April
ID: 3119009 • Letter: I
Question
In April 2008 the unemployment rate in the United States stood at 5.0%. By April 2009 it had increased to 9.0%, and it had increased further, to 10.0%, by October 2009. Were some groups of workers more likely to lose their jobs than others during the Great Recession? For example were young workers more likely to lose their jobs than middle-aged workers? What about workers with a college degree versus those without a degree, or women versus men? On the textbook website, http://www.pearsonhighered .com/stock watson, you will find the data file Employment 08 09, which contains a random sample of 5440 workers who were surveyed in April 2008 and reported that they were employed full time. A detailed description is given in Employment 08 09 Deseription, available on the website. These workers were surveyed one year later, m April 2009, and asked about their employment status (employed, unemployed, or out of the labor force). The data set also includes various demographic measures for each individual. Use these data to answer the following questions. a. What fraction of workers in the sample were employed in April 2009? Use your answer to compute a 95% confidence interval for the probability that a worker was employed in April 2009 conditional on being employed in April 2008. b. Regress Employed on Age and Age, using a linear probability model. i. Based on this regression, was age a statistically significant determinant of employment in April 2009? i. Is there evidence of a nonlinear effect of age on the probability of being employed? ii. Compute the predicted probability of employment for a 20-year-old worker, a 40-year-old worker, and a 60-year-old worker c. Repeat (b) using a probit regression. d. Repeat (b) using a logit regression. e. Are there important differences in your answers to (b)-(d)? Explain f. The data set includes variables measuring the workers' educational attainment, sex, race marital status, region of the country, and weekly earnings in April 2008. i. Construct a table like Table 11.2 to investigate whether the conclusions on the effect of age on employment from (b)-(d) are affected by omitted variable bias.Explanation / Answer
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