Nov. 8, 2007 ECON 140A/240A-1 L. PhillipsTake-home I : Due Tuesday Nov. 20I. Your report should have an executive summary of one to two pages that summarizes your findings in words for a non-technical reader. It should explain the problem being examined from an economic perspective, i.e. it should motivate interest in the issue on the part of the reader. Your report should explain how you are investigating the issue, in simple language. It should explain why you are approaching the problem in this particular fashion. Your executive report should explain the economic importance of your findings.The technical details of your findings you can attach as an appendix.II. The EXCEL file Xr 18-13 ( see problem 18.13, p.645) and corresponding EVIEWS file Lottery, from lab 6 contain the basic data. Since the variable lottery is percent of income spent on lottery tickets, and has a lot of zeros, linear regression of lottery against income in thousands of dollars, number of years of education, age, and number of children, yields regression slope parameters based towards zero for these explanatory variables.A. Convert lottery to a Bernoulli Variable using the generating commandBern=0*(lottery=0)+1*(lottery>0) and compare the variables lottery and bern to see that the variable was converted correctly.1. Estimate a linear probability model, LPM, regressing bern against the four explanatory variables mentioned above and a constant. Which ecplanatory variables are significant and which variables are insignificant?2. Re-estimate this LPM against income and an Indicator variable called highered which has the value zero if years of education areless than 13 and has the value one if years of education are greater than 12. Is highered significant?Nov. 8, 2007 ECON 140A/240A-2 L. PhillipsTake-home I : Due Tuesday Nov. 203. Re-estimate this LPM against income and an Indicator variable called bachelors which has the value zero if years of education are less than 16 and has the value one if years of education are greater than 15. Is bachelors significant?4. Use the estimation results above and using the View menu, go to the table of actual, fitted and residual and copy the fitted value and paste it into an empty column of the group data window for bern, income, and bachelors. Plot fitted against income. Why are there two lines?B Use Eviews to estimate a logit model of bern against income and bachelors. Again plot the fitted variable against income. Explain what you
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