3. [Saving and Income]. This question examines the determinants of household sav

Question

3. [Saving and Income]. This question examines the determinants of household savings The model is you can find the definition of variables in the following link WAGE1.DES and the dataset can be downloaded from the following webpage DATASET (SAVING data) (a) Do the following using STATA commands: i. Compute the natural log of savings, tag or name this variable as "lsav". [Hint: help generate; help label] ii. Compute the natural log of savings, tag or name this variable as "Inc". [Hint: help generate; help label] ii. Drop the variable called "cons" from this dataset. [hint: help drop] iv. Plot in a same graph the prediction or forecast, the actual value of savings and the income for each household. [hint: help scatter (b) Run the model specified in (1) and do the following i. Report diagnosis and treatment in the presence of non-spherical disturbances Hint: It is a cross section dataset ii. How do you interpret the OLS estimate of in economic and statistical terms? iii. Why should we control for another variables as size, educ, age and black? iv. What is the prediction of household savings for a family with total income equal to 9185 dollars, number of members equal to 4, years of education and age of the household head equal to 5 and 30 respectively, also we know that the head of this family is white.

Explanation / Answer

You ask Stata to echo a session by typing "log using filename" and Stata automatically names it filename.log. When you are done, you type "log close" and the log file will be ready for your editing, printing, etc. I usually ask Stata to open (and close) a log file in my do file.

Although it is possible to use Stata interactively (i.e., you enter the command at the Stata prompt, Stata performs it, you enter another command, etc.), in this course you will be required to write Stata do-files. The advantage of writing a do-file is that you do not have to type the same commands again and again before you get the correct sequence of commands. Also, if you do not complete your problem set in a single session, you can easily pick up where you left off.

Note that Stata will stop running at a line that it cannot execute. When a Stata do-file stops running in the middle, you will need to fix your do-file. In your text editor, edit the part of the program that Stata stopped at. Run the program again. When Stata executes the whole program, you will have a clean log file.

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