ETC2410 Assignment 1 2023
ETC2410 Assignment 1 2023
Assignment 1
Group Members: Abhinav Mathena, Afnan Nahyan, Parth Mahajan and
Yu Ooi
Group 12
Question 1 a)
i)
Estimated Equation:
lbwght = β + β 𝑐𝑖𝑔𝑠 + 𝑢
ii)
Null Hypothesis Testing:
𝐻 :β = 0
𝑯𝟏 : β < 𝟎
The 𝑡 can then be calculated as follows:
β −0.00491
t = = = −5.7
se β 0.000849
We will use the 𝑡 value calculated from EViews as it is to a greater accuracy, the above is
only to 6 decimal places. Hence 𝑡 = −5.2898
iv)
Predicted average birth weight of infants born to women who smoke 10 cigs per day is given
by:
v)
We have conclusive evidence that smoking by the mother during pregnancy will REDUCE
the average birth weight of a newly born infant. This can be explained by looking at the
predicted values of a mother who does not smoke and a mother who smokes 10 cigarettes a
day. It is predicted that the mother who smokes 10 cigs a day will result on average the infant
weighting 4.619 ounces less than an infant for a mother who does not smoke.
b)
I)
𝑙𝑏𝑤𝑔ℎ𝑡 = 4.688 + 0.053𝑤ℎ𝑖𝑡𝑒 + 0.026𝑚𝑎𝑙𝑒 − 0.004𝑐𝑖𝑔𝑠 + 0.008𝑙𝑓𝑎𝑚𝑖𝑛𝑐
(0.019) (0.013) (0.010) (0.001) (0.006)
II)
Based on the output obtained we see that the sample value of the F statistic for testing the
joint significance of the regressions is 15.025, with a p-value of 0.000. Since the p-value is
zero, we reject the null hypothesis that the regressions are jointly insignificant at any
significance level.
III)
From appendix b, we see that the regression family income is individually insignificant, with
a p-value of 0.1597 at the 10% significance level.
IV)
From appendix b(I), we see that the regressions family income is individually insignificant,
with a p-value of 0.1597 at the 10% significance level.
V)
–Controlling for gender, the average number of cigs smoked per day by the mother during
pregnancy and family income, we have no strong reason to believe that whether the mother is
a person of colour will have any effect on the weight of her newly born baby than that of a
white mother. Therefore, we have no strong prior belief regarding the sign of 𝛽 .
– Controlling for the mother’s race, the average number of cigarettes smoked per day by the
mother during pregnancy and family income, it seems plausible that male babies have higher
birthweights as males have greater bone density in comparison to females. Therefore, our
prior expectation is that 𝛽 is positive which aligns with the regression output.
– Controlling for the mother’s race, gender, and family income it seems plausible that the
number of cigarettes smoked by the pregnant mother during pregnancy will have an adverse
effect on the baby's health due to the known negative effects of cigarettes. Therefore, our
prior expectation is that 𝛽 is negative which aligns with the regression output.
– Controlling for the mother’s race, the gender of the newly born male and the average
number of cigs smoked per day by the mother during pregnancy, it seems plausible that
birthweight will be higher for mothers with greater family incomes as they have greater
access to food and healthcare. Therefore, our prior expectation is that 𝛽 is positive which
aligns with the regression output.
VI)
From appendix b:
𝑅 = 0.04
Therefore, the explanatory variables explain about 4% of the sample variation in lbwght
across newly born babies.
VII)
𝛽 gives the estimated average percentage change in baby birth weight of 0.008%, if there is
a 1% change in family income, holding all else constant.
VIII)
According to the regression output the most significant influence on the weight of a newborn
baby, is the number of cigarettes smoked by the mother during pregnancy. Since this has a p
value of 0 it will pass significant tests at all levels.
c)
i)
Original Equation:
𝐻 :β =β =0
Restricted Equation:
We can see that the 𝑙𝑏𝑤𝑔ℎ𝑡 of a female baby with a white mother who does not smoke, and
has a family income of $100,000 would result in the baby weighing:
𝑙𝑏𝑤𝑔ℎ𝑡 = 4.688 + 0.053 ∗ (1) ∗ 0.026 ∗ (0) − 0.004 ∗ (0) + 0.008 ∗ (ln 100)
𝑙𝑏𝑤𝑔ℎ𝑡 = 4.779
Now holding all coefficients but “white” constant, will allow us to find the weight of the
baby coming from a coloured family.
𝑙𝑏𝑤𝑔ℎ𝑡 = 4.688 + 0.053 ∗ (0) ∗ 0.026 ∗ (0) − 0.004 ∗ (0) + 0.008 ∗ (ln 100)
𝑙𝑏𝑤𝑔ℎ𝑡 = 4.726
By holding the gender, the number of cigs consumed, as well as the family income constant,
we can see that the birth of a while baby is 0.053 ounces greater than if the baby was to be
coloured. This goes in favour of our findings in part I, where we found that β ≠
0 𝑎𝑛𝑑/𝑜𝑟β ≠ 0 as the null hypothesis was rejected. By holding all variables constant, we
can see that the race of the baby has some impact on the weight of the baby.
d)
Answer (d)-(i): 𝛽 gives the percentage change in average baby weight, depending on the
average number of cigarettes smoked per day by the mother during pregnancy.
Answer (d)-(ii): Holding all other factors constant, 𝛽 gives a decrease of 0.4% in average
birth weight, for each additional cigarette smoked per day by the mother on average during
pregnancy. For every 1 cigarette smoked, we can predict the weight of the baby to decrease by
𝑒 . = 1.004 ounces.
Answer (d)-(iii): The coefficient 𝛽 is -0.004, which means that while there is a decrease in
birth weight for every additional cigarette smoked, the magnitude of this decrease might be
considered small in practical terms. However, when considering the potential cumulative effect
of smoking multiple cigarettes daily over the course of a pregnancy, the overall impact could
be substantial.
Answer (d)-(iv):
Answer (d)-(v): The t-value that we get from the table for 𝑡( ) degrees of freedom is
1.96. Now, deriving a 95% confidence interval for 𝛽 using the standard formula is given
below:
CI = coefficient ± (1.98 × standard error)
For 𝛽 :
Lower Limit: −0.004 − (1.98 × 0.001) = −0.00598
Upper Limit: −0.004 + (1.98× 0.001) = −0.00202
Answer (d)-(vi): As the standard of error of 𝛽 is 0.001, which indicates how much 𝛽 would
differ from the actual population parameter 𝛽 if we were to take multiple samples from the
population. Since a smaller standard of error typically indicates that the estimator is more
precise, we can presume that 𝛽 is a precise estimate of 𝛽 .
e)
Answer (e)-(i):
The Population Model for Quadratic Function:
𝑙𝑏𝑤𝑔ℎ𝑡 = 𝛽 + 𝛽 𝑤ℎ𝑖𝑡𝑒 + 𝛽 𝑚𝑎𝑙𝑒 + 𝛽 𝑐𝑖𝑔𝑠 + 𝛽 𝑐𝑖𝑔𝑠 + 𝛽 𝑙𝑓𝑎𝑚𝑖𝑛𝑐 + 𝑢
The Estimated Equation:
𝛽 0.000122
𝑡 = = = 1.781
𝑠𝑒(𝛽 ) 0.0000685
𝑙𝑏𝑤𝑔ℎ𝑡 = (0.019)
4.691 + 0.055𝑤ℎ𝑖𝑡𝑒
(0.013)
+ (0.010)
0.025𝑚𝑎𝑙𝑒 − 0.007𝑐𝑖𝑔𝑠 + 0.000122𝑐𝑖𝑔𝑠
(0.002) (6.85E-05)
+ 0.008𝑙𝑓𝑎𝑚𝑖𝑛𝑐
(0.006)
Now, holding all else constant the predicted effect on lbwght from increasing cigs from 10 to
15 is:
Δ𝑙𝑏𝑤𝑔ℎ𝑡 = 𝛽 (𝑐𝑖𝑔𝑠 − 𝑐𝑖𝑔𝑠 ) + 𝛽 (𝑐𝑖𝑔𝑠 − 𝑐𝑖𝑔𝑠 )
Δ𝑙𝑏𝑤𝑔ℎ𝑡 = − 0.007(15 − 10) + 0.000122(15 − 10 )
Δ𝑙𝑏𝑤𝑔ℎ𝑡 = −0.01975
|Δ𝑙𝑏𝑤𝑔ℎ𝑡| = 0.01975
Δ𝑏𝑤𝑔ℎ𝑡 = 0.980
Considering the model controls for gender, race, and income, a mother increasing her cigarette
consumption from 10 to 15 cigarettes per day during pregnancy is predicted to decrease the
birth weight of their child by 0.980 ounces. Therefore, it can be concluded that keeping other
things constant if a mother increases her average cigarette consumption per day from 10 to 15,
the average birth weight will decrease by 0.980 ounces.
Answer (e)-(iii):
When controlling for all other variables, we must first derive the partial derivative of cigs and
𝑐𝑖𝑔𝑠 from the estimated model:
𝑙𝑏𝑤𝑔ℎ𝑡 = 4.691
(0.019)
+ 0.055𝑤ℎ𝑖𝑡𝑒
(0.013)
+ 0.025𝑚𝑎𝑙𝑒
(0.010)
− 0.007𝑐𝑖𝑔𝑠
(0.002)
+ 0.000122𝑐𝑖𝑔𝑠
(6.85E-05)
+ 0.008𝑙𝑓𝑎𝑚𝑖𝑛𝑐
(0.006)
𝜕
= −0.007𝑐𝑖𝑔𝑠 + 0.000122𝑐𝑖𝑔𝑠
𝜕𝑐𝑖𝑔𝑠
𝜕
= −0.007 + 0.000244𝑐𝑖𝑔𝑠
𝜕𝑐𝑖𝑔𝑠
Now solve for cigs, where cigs has 0 marginal effect on birthweight:
0 = −0.007 + 0.000244𝑐𝑖𝑔𝑠
0.000244𝑐𝑖𝑔𝑠 = 0.007
𝑐𝑖𝑔𝑠 = 28.689
From this result, we can infer that taking 28 or less cigarettes will result in a negative
marginal effect on birthweight.
f)i)
𝛿
𝑡 = ~𝑡 = 1382 𝑢𝑛𝑑𝑒𝑟 𝐻0
𝑠𝑒 𝛿
−0.026474
𝑡 = = −1.288048
0.020554
𝑡 = 1.658
Decision: Since -1.288<1.658 there is not enough evidence to reject the null in favour of the
alternative hypothesis.
Conclusion: Due to the 𝑡 of -1.288 being less than the 𝑡 of 1.658, there is not enough
evidence to reject the hypothesis that the average birthweight of male infants in population A
is the same as the average birthweight of female infants in population B, in favour of the
hypothesis that the average birthweight of male infants in population A is greater than the
average birthweight of female infants in population B.
Appendix
Appendix(a):
Appendix(b):
Appendix(c):
Appendix(e):
Appendix(f):
Appendix(g):