Economics 426
Spring 2011
Homework # 1 (Part I)
Phillip Campbell
1. Write down an econometric model that might be used to estimate the supply curve for corn. Your equation
should be of the following linear form:
y = 0 + 1 X1 + 2 X2+ … + e
Replace the general notation in the above equation with specific variables that would be relevant determinants
of market supply. Include no fewer than three specific plausible determinants of quantity supplied. Each
determinant should be well defined and should pertain to something that you could actually locate in a data
search. For the purposes of this exercise you should assume that the market for corn is competitive. Based on
economic theory what do you expect the signs (positive or negative) on the coefficients (β ’s) to be for each
i
right-hand side X variable in your model? Explain. (2 points)
y=β0 + β1(Price of corn) + β2(gov subsidies) – β3(inputs, seed, fuel,
and fertilizer) – β4(price of substitutes, beans)
2. Consider the diagram below that plots aggregate consumption expenditures (C) against income levels (Y) for
several years for two different decades for the same economy. Suppose that you are interested in estimating the
marginal propensity to consumer (MPC) for the economy. The MPC is defined as:
MPC = ∆C/∆Y
Do you think it would be better to pool the data for both decades and fit a single line representing the
relationship between consumption and income or would it be better to fit two separate lines, one for each
decade, to get a better estimate of the economy’s MPC at any point in time? Explain. [Hint: The slope of the
line is the marginal propensity to consume.] (2 points)
 
C


 
 
Decade 2

 
Decade 1
Y
I would not pool the data because the estimated slopes of the fit lines for each decade are significantly
different , and pooling the data would give one fit line for both decades giving a poor MPC for both
decades.
3. Below are some data for the state of Ohio for the years 2000-09. TobControl stands for per capita spending
on tobacco control by the state for each year. MSA Payments represents the amount of payments the state
received each year under the 1998 Master Settlement Agreement between the states and large tobacco
companies. There are no legal restrictions on how the states use this money. Unemployment Rate is the state
unemployment for each year. You are interested in investigating of the amount of MSA payments and state
unemployment rate affects spending on tobacco control.
Ohio
Ohio
Ohio
Ohio
Ohio
Ohio
Ohio
Ohio
Ohio
Ohio
Year TobControl
$60
2000
$60
2001
$22
2002
$34
2003
$38
2004
$53
2005
$47
2006
$45
2007
$45
2008
$40
2009
MSA Payments
$412,275,427
$312,446,299
$357,821,523
$340,436,808
$316,700,000
$321,100,000
$293,800,000
$305,800,000
$334,300,000
$366,895,000
Unemployment
Rate
4.3
4.0
4.4
5.7
6.2
6.1
5.9
5.4
5.6
10.7
Tobcontrol
MSA Payments
adjusted
adjusted
$77 $529,086,797.98
$67.50 $351,502,086.38
$26.77 $435,349,519.65
$39.38 $394,339,302.60
$48.45
$403,792,500
$67.58
$409,402,500
$57.18 $357,456,666.67
$59.63
$405,185,000.0
$45.38 $337,085,833.33
$49.33 $452,503,833.33
Prior to analyzing this data you must adjust the nominal monetary units for inflation. Make the
appropriate adjustments and interpret in words your adjusted data for 2009. For the purpose of this
exercise, use the Consumer Price Index – All Urban Consumers with 1982-84 as the base year. [Hint:
Consult any principles of economics text if you need help with making the adjustment.] (2 points)
Economics 426
Applied Econometrics
Spring 2011
Homework # 1 (Part II)
Possible Points: 14
Date Due: Thursday, January 20
Part II submission procedure: Submit to instructor as an email attachment. Put in the subject
line: “Econ 426, Homework # 1, Part II.”
Since this is a class that deals with the analysis of economic data it makes sense to begin by gaining expertise in
where to locate such data. You are to collect data for each of the following items listed below. You should be
able to find an example of all data categories on line. For each data item in the table below:
1. Write the Internet address or link that can be used to access to data in the right-hand column. Be sure the
link goes directly to the data and not something else. For example, http://www.census.gov will not be
sufficient as this is only a link to the home page of the Census Bureau home page and not directly to any
data. When I receive your completed table electronically I should be able to click on the link and
directly access the data. It is OK if your link takes you to a “pull down” menu where you can then
select the data.
2. All data must be either cross-sectional or time-series with a minimum of 20 observations (unless
otherwise noted) that are suitable for econometric analysis. This means that the data must be numerical,
graphs are not acceptable.
3. A data item consists of at least one variable that can be used in a regression.
An asterisk by the data item means that you are expected to find to most recent data available. To insure that
you get the most recent data use primary websites or sources rather than secondary sources. A primary source
refers to the government agency or institution/enterprise that is responsible for collecting the data. For example,
the Bureau of Economic Analysis is responsible for estimating Gross Domestic Product for the US.
Good starting places to track down this data include Bill Goffe’s Resources for Economists on the Internet
(http://www.rfe.org/), Economagic (http://www.economagic.com/, the Census Bureau (http://www.census.gov),
Bureau of Economic Analysis (http://www.bea.gov), the World Bank’s World Development Indicators
Database Online (see Economics Department website home page), and the Economics Department Website
(“Economics Web Links” http://www.uakron.edu/colleges/artsci/depts/econ/).
It is OK to consult with your classmates in doing this exercise, to a point. However, it will be unsatisfactory for
you to submit a full set of Internet links that are all identical with those of another classmate. For several of data
items below, you have some discretion (choice) over what you submit and I am expecting variation in these
submissions. (14 points)
Economics 426
Applied Econometrics
Spring 2011
Homework # 1 (Part II)
Possible Points: 14
Your Name: Phillip Campbell
Your Score: 14/14 (MAN)
Data Item
Link (Make sure the link works!)
1.
http://www.bls.gov/web/laus/laumstrk.htm
2.
3.
4.
5.
6.
7.
8.
9.
Data where the unit of
observation is the 50
individual states of the United
States
Data where the unit of
observation is a country other
than the US with at least 20
time periods
Data reported as a change in its
value of an economic variable
(time series or cross-sectional)
Data reported as a level (time
series or cross-sectional)
Data reported as an index from
(time series or cross-sectional)
*Unemployment data by race
and/or gender (time series)
Manufacturing data (time
series or cross-sectional)
International economic data for
at least 25 countries (crosssectional)
*Interest rate (time series)
10. *Data on real GDP (time
series)
11. *Data on cigarette prices
(cross-sectional)
12. *Budget deficit for the US
Federal Government (time
series)
13. *Data on the price of gasoline
for past two years (time series)
14. Data on corruption
http://www.economagic.com/em-cgi/data.exe/rba/ggdpcvgdp
http://bea.gov/national/index.htm#gdp Click the “percent change
from preceding period” third link on the page
http://bea.gov/national/index.htm
Click “current dollar and ‘real’ GDP” second link on the page
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
ftp://ftp.bls.gov/pub/suppl/empsit.cpseea10.txt
http://www.economagic.com/em-cgi/data.exe/cenm3/amtmvs
http://dataweb.usitc.gov/scripts/cy_m3_run.asp
http://www.federalreserve.gov/releases/h15/data/Business_day/H
15_SWAPS_Y1.txt
http://bea.gov/national/index.htm
Click “current dollar and ‘real’ GDP” second link on the page
http://www.in.gov/atc/2387.htm
http://www.cbo.gov/ftpdocs/119xx/doc11999/12-14FederalDebt.pdf
Table A-2 on page 37, far right column
http://www.eia.doe.gov/petroleum/data_publications/wrgp/mogas
_history.html Click the desired area, go to the data 1 tab of excel
http://www.icgg.org/corruption.cpi_2008_data.html