Four hundred driver’s license applicants were randomly selected and askedwhether

Question

Four hundred driver’s license applicants were randomly selected and askedwhether they passed their driving test (Passi =1) or failed their test (Passi = 0). Data were collected on their years of driving experience.

Dependent variable: PassRegression

0.031***

(0.009)

0.006***

(0.002)

.71***

(0.126)

0.77***

(0.34)

*** p-value < 0.01, ** p-value < 0.05, * p-value <0.10

a. Chris is a new driver and has 0 years of driving experience. What is the probability thathe will pass the test under each model?

i. Probit?

ii. Linear Probability?

b. Mary has 50 years of driving experience. What is the probability that she will pass thetest under each model? Are the results feasible?

i. Probit?

ii. Linear Probability?

Regression (1) Probit (2) linear Probablility Experience

0.031***

(0.009)

0.006***

(0.002)

Constant

.71***

(0.126)

0.77***

(0.34)

Explanation / Answer

a. Chris is a new driver and has 0 years of driving experience. What is the probability that they will pass the test under each model?

i. Probit?

Answer : The Probability equation

Probit = 0.71 + 0.031 * number ofyears of experience = 0.71 + 0.031 * 0 = 0.71

so there is 71% probability that he will pass the driving test.

ii. Linear Probability?

The Probability equation

Linear Probability = 0.77 + 0.006 * number of years of experience = 0.77 + 0.006 * 0 = 0.77

so there is 77% probability that he will pass the driving test.

b. Mary has 50 years of driving experience. What is the probability that she will pass thetest under each model? Are the results feasible?

i. Probit?

Answer :

The Probability equation

Probit = 0.71 + 0.031 * number ofyears of experience = 0.71 + 0.031 * 50 = 2.26

impractical and infeasible result but one can draw inference that she will definitely pass the test.

ii. Linear Probability?

Answer :

The Probability equation

Linear Probability = 0.77 + 0.006 * number of years of experience = 0.77 + 0.006 *50 = 1.07

another impractical and infeasible result but one can draw inference that she will definitely pass the test.

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