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CHAPTER 1
TEACHING NOTES
You have substantial latitude about what to emphasize in Chapter 1. I find it useful to talk about
the economics of crime example (Example 1.1) and the wage example (Example 1.2) so that
students see, at the outset, that econometrics is linked to economic reasoning, even if the
economics is not complicated theory.
I like to familiarize students with the important data structures that empirical economists use,
focusing primarily on cross-sectional and time series data sets, as these are what I cover in a
SOLUTIONS TO PROBLEMS
1.1 (i) Ideally, we could randomly assign students to classes of different sizes. That is, each
student is assigned a different class size without regard to any student characteristics such as
ability and family background. For reasons we will see in Chapter 2, we would like substantial
variation in class sizes (subject, of course, to ethical considerations and resource constraints).
1.2 (i) Here is one way to pose the question: If two firms, say A and B, are identical in all
respects except that firm A supplies job training one hour per worker more than firm B, by how
much would firm A’s output differ from firm B’s?
1.3 It does not make sense to pose the question in terms of causality. Economists would assume
that students choose a mix of studying and working (and other activities, such as attending class,
leisure, and sleeping) based on rational behavior, such as maximizing utility subject to the
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SOLUTIONS TO COMPUTER EXERCISES
C1.1 (i) The average of educ is about 12.6 years. There are two people reporting zero years of
education, and 19 people reporting 18 years of education.
C1.2 (i) There are 1,388 observations in the sample. Tabulating the variable cigs shows that 212
women have cigs > 0.
(ii) The average of cigs is about 2.09, but this includes the 1,176 women who did not
smoke. Reporting just the average masks the fact that almost 85 percent of the women did not
C1.3 (i) The largest is 100, the smallest is 0.
(ii) 38 out of 1,823, or about 2.1 percent of the sample.
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C1.4 (i) 185/445 .416 is the fraction of men receiving job training, or about 41.6%.
(ii) For men receiving job training, the average of re78 is about 6.35, or $6,350. For men not
receiving job training, the average of re78 is about 4.55, or $4,550. The difference is $1,800,
C1.5 (i) The smallest and largest values of children are 0 and 13, respectively. The average is
about 2.27.
(ii) Out of 4,358 women, only 611 have electricity in the home, or about 14.02 percent.
(iii) The average of children for women without electricity is about 2.33, and for those with
electricity it is about 1.90. So, on average, women with electricity have .43 fewer children than
those who do not.
