Estimating a Wages Model using STATA | Correlation Matrix and VIF Calculation

Model Estimation using STATA Commands

where the variables are defined as follows:

WAGES = current hourly wages in $
SCHOOL = years of schooling
EXPER = years of out-of-school work experience
SCHOOLEXPER = interaction between SCHOOL and EXPER
MALE = gender of respondent (1 if male, 0 otherwise)
ETHBLACK = African-American (1 if African-American, 0 otherwise)
ETHHISP = Hispanic (1 if Hispanic, 0 otherwise)

together with the U.S. dataset Wages.dta, which is available in Brightspace.

a) Using an appropriate set of STATA commands, estimate this model, and then copy and paste the output into your assignment. Be sure to include ALL of your STATA commands in this output.

b) Using STATA, compute the correlation matrix for the explanatory variables, and then cut and paste this correlation matrix into your assignment.

c) Using STATA to run the relevant regressions, calculate the VIFs for this model using the steps outlined on p. 234, together with the formula in equation (8.16).

d) Using Klein’s Rule of Thumb (discussed in footnote 6 on p. 235), do any of the