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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
10.8. Use the data in NORWAY.RAW for the years 1972 and 1978 for a two-year panel data analysis. The model is a simple distributed lag model:
logðcrimeitÞ ¼ y0 þ y1d78t þ b1clrprci; t-1 þ b2clrprci; t-2 þ ci þ uit
The variable clrprc is the clear-up percentage (the percentage of crimes solved). The data are stored for two years, with the needed lags given as variables for each year.
a. First estimate this equation using a pooled OLS analysis. Comment on the deter- rent e¤ect of the clear-up percentage, including interpreting the size of the coe‰- cients. Test for serial correlation in the composite error vit assuming strict exogeneity (see Section 7.8).
b. Estimate the equation by fixed e¤ects, and compare the estimates with the pooled OLS estimates. Is there any reason to test for serial correlation? Obtain heteroskedasticity-robust standard errors for the FE estimates.
c. Using FE analysis, test the hypothesis H0: b1 ¼ b2. What do you conclude? If the hypothesis is not rejected, what would be a more parsimonious model? Estimate this model.
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