Page 260 -

Empirical Exercises 259

a. Regress Birthweight on Smoker. What is the estimated effect of smoking
on birth weight?

b. Regress Birthweight on Smoker, Alcohol, and Nprevist.

i. Using the two conditions in Key Concept 6.1, explain why the
exclusion of Alcohol and Nprevist could lead to omitted variable
bias in the regression estimated in (a).

ii. Is the estimated effect of smoking on birth weight substantially
different from the regression that excludes Alcohol and Nprevist?
Does the regression in (a) seem to suffer from omitted variable
bias?

iii. Jane smoked during her pregnancy, did not drink alcohol, and
had 8 prenatal care visits. Use the regression to predict the birth
weight of Jane’s child.

iv. Compute R2 and R 2. Why are they so similar?

c. Estimate the coefficient on Smoking for the multiple regression
model in (b), using the three-step process in Appendix (6.3) (the
Frisch-Waugh theorem). Verify that the three-step process yields the
same estimated coefficient for Smoking as that obtained in (b).

d. An alternative way to control for prenatal visits is to use the binary
variables Tripre0 through Tripre3. Regress Birthweight on Smoker,
Alcohol, Tripre0, Tripre2, and Tripre3.

i. Why is Tripre1 excluded from the regression? What would happen
if you included it in the regression?

ii. The estimated coefficient on Tripre0 is large and negative. What
does this coefficient measure? Interpret its value.

iii. Interpret the value of the estimated coefficients on Tripre2 and
Tripre3.

iv. Does the regression in (d) explain a larger fraction of the variance
in birth weight than the regression in (b)?

E6.2 Using the data set Growth described in Empirical Exercise E4.1, but
excluding the data for Malta, carry out the following exercises.

a. Construct a table that shows the sample mean, standard deviation,
and minimum and maximum values for the series Growth, Trade-
Share, YearsSchool, Oil, Rev_Coups, Assassinations, and RGDP60.
Include the appropriate units for all entries.