Jahangirnagar University

Department of Accounting & Information Systems

AN ASSIGNMENT
On
Problem set-1
Course Name: Applied Research Methods
Course Code: 5105

Submitted To:
Pappu Kumar dey
Assistant Professor
Dept. of Accounting & Information Systems
Jahangirnagar University

Submitted By:
Sadia Islam
ID-1404

Date of Submission:06.12.2020
 Table-01: Summary Statistics

Outcome Students who enrolled in public Differences between private and

school public-school students

Sample Mean Standard Sample Mean Standard

Deviation Deviation
Earnings 94970.35 50448.75 9859.35 3,685.42

Own SAT scores 1028.986 255.2365 202.525 58.0891

Parental Income 16328.05 2267.593 8727.20 1493.099

This table shows the summary statistics for earnings, SAT score, and parental income. It reports
the mean earnings and standard deviation for the students who enrolled in public school and the
difference of those between private and public school students.

From 2626 public school and 2957 private school student’s observation in our given data set, we
can observe that the mean and standard deviation of earning of students who enrolled in the
public school are 94,970 and 50,448. On the other hand, the mean and standard deviation of
earning for the students who enrolled in the private school are 104,829 and 54,134.So, it is found
that students who enrolled in private school have higher mean earnings. The SAT score and
parental income are same as well. The standard deviation as reported in the table signifies that
the values of students enrolled in the private school are more spread out than those of public
school students.
Workings in STATA:
. import excel "C:\Users\Suhi\Downloads\problem_set1_data (1).xlsx", sheet("Sheet1") firstrow
. keep 1/2626
1 invalid name
r(198);
. keep in 1/2626
(2957 observations deleted)
. keep parental_income SATscore earnings
. asdoc summarize earnings SATscore parental_income
(File Myfile.doc already exists, option append was assumed)
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
earnings | 2626 94970.35 50448.75 18249.82 773080.8
SATscore | 2626 1028.986 255.2365 800 1600
parental_i~e | 2626 16328.05 2267.593 10690 28770
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
earnings | 2626 94970.35 50448.75 18249.82 773080.8
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
SATscore | 2626 1028.986 255.2365 800 1600
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
parental_i~e | 2626 16328.05 2267.593 10690 28770
Click to Open File: Myfile.doc
. import excel "C:\Users\Suhi\Downloads\problem_set1_data (1).xlsx", sheet("Sheet1") firstrow
. keep parental_income SATscore earnings
. keep in 2627/5583
(2626 observations deleted)
. asdoc summarize earnings SATscore parental_income
(File Myfile.doc already exists, option append was assumed)
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
earnings | 2957 104829.7 54134.17 19287.83 569937.8
SATscore | 2957 1231.511 313.3256 800 1600
parental_i~e | 2957 25055.25 3760.692 15772 41632
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
earnings | 2957 104829.7 54134.17 19287.83 569937.8
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
SATscore | 2957 1231.511 313.3256 800 1600
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
parental_i~e | 2957 25055.25 3760.692 15772 41632
Click to Open File: Myfile.doc
 Table – 02: Private School effect: Barron’s Match

No Selection Controls Selection Controls

(1) (2) (3) (4) (5) (6)
Private school 0.097 0.006 -0.003 0.085 0.013 0.005
(0.013) (0.013) (0.021) (0.013) (0.013) (0.021)
Own SAT score 0.0448 0.045 0.038 0.0006
/ 100 (0.002) (0.002) (0.002) (0.002)
Log parental 0.022 0.202
income (0.044) (0.043)
Female -0.397 -0.394
(0.016) (0.017)
Selectivity
group dummies No No No Yes Yes Yes

This table reports estimates of the effect of attending a private school on earnings. The columns
show coefficients from a regression of log earnings on the dummy for attending a private school
and controls. The results in columns 4-6 are from models that include selectivity group dummies.
The sample size is 5,583 and standard error are reported in parentheses.

A regression model is run to estimate the effects of being enrolled in a private school on the
earnings in later life. In the model the dependent variable is log earnings of student. The
treatment variable is a dummy variable that indicated the students who attended in a private
school. The control or independent variables taken into consideration are private school, SAT
score/100, log parental income, female. Another issue considered for the regression is the
selectivity controls, the 130 schooling options available to the students, in which they applied
and got admission.

The result of the model shows that the effects of parental income is more prominent on the
earnings of students rather than the type of school, public or private. It implies that students with
a higher parental income tend to earn more or they look for opportunities with higher earnings.
Without selective control, earning has positive relationship with private school dummy variable
and the relation is not significant (p value 0.89) considering SAT score and parental income. If
we exclude these variables, there is a positive relationship between earning and private school
variable and the relation is significant (p value 0.00).

When we control the effect of selection bias through selective control, the relationship between
earning and private school effect decreases (0.007) and the relationship is not significant.

So, simply we can conclude that private school variable has not significant effect on earnings.
Workings in STATA:

. import excel "C:\Users\Suhi\Downloads\problem_set1_data (1).xlsx", sheet("Sheet1") firstrow

. asdoc reg earnings private_school, r

(File Myfile.doc already exists, option append was assumed)

Linear regression Number of obs = 5583

F( 1, 5581) = 49.59

Prob > F = 0.0000

R-squared = 0.0087

Root MSE = 52433

--------------------------------------------------------------------------------

| Robust

earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | 9859.334 1400.079 7.04 0.000 7114.633 12604.03

_cons | 94970.35 984.4601 96.47 0.000 93040.43 96900.28

--------------------------------------------------------------------------------

. ttest SATscore, by ( private_school)

Two-sample t test with equal variances

------------------------------------------------------------------------------

Group | Obs Mean Std. Err. Std. Dev. [95% Conf. Interval]

---------+--------------------------------------------------------------------

0 | 2626 1028.986 4.980757 255.2365 1019.219 1038.752

1 | 2957 1231.511 5.76196 313.3256 1220.213 1242.809

---------+--------------------------------------------------------------------

combined | 5583 1136.252 4.077957 304.7028 1128.258 1144.246

---------+--------------------------------------------------------------------

diff | -202.5254 7.708192 -217.6365 -187.4144

------------------------------------------------------------------------------

diff = mean(0) - mean(1) t = -26.2741

Ho: diff = 0 degrees of freedom = 5581

Ha: diff < 0 Ha: diff != 0 Ha: diff > 0

Pr(T < t) = 0.0000 Pr(|T| > |t|) = 0.0000 Pr(T > t) = 1.0000

. ttest parental_income, by ( private_school)

Two-sample t test with equal variances

------------------------------------------------------------------------------

Group | Obs Mean Std. Err. Std. Dev. [95% Conf. Interval]

---------+--------------------------------------------------------------------

0 | 2626 16328.05 44.25045 2267.593 16241.28 16414.82

1 | 2957 25055.25 69.15795 3760.692 24919.64 25190.85

---------+--------------------------------------------------------------------

combined | 5583 20950.35 71.92871 5374.476 20809.34 21091.36

---------+--------------------------------------------------------------------

diff | -8727.197 84.40775 -8892.669 -8561.725

------------------------------------------------------------------------------

diff = mean(0) - mean(1) t = -1.0e+02

Ho: diff = 0 degrees of freedom = 5581

Ha: diff < 0 Ha: diff != 0 Ha: diff > 0

Pr(T < t) = 0.0000 Pr(|T| > |t|) = 0.0000 Pr(T > t) = 1.0000

. ttest earnings == parental_income

Paired t test

------------------------------------------------------------------------------

Variable | Obs Mean Std. Err. Std. Dev. [95% Conf. Interval]

---------+--------------------------------------------------------------------

earnings | 5583 100192.3 704.7534 52658.81 98810.7 101573.9

parent~e | 5583 20950.35 71.92871 5374.476 20809.34 21091.36

---------+--------------------------------------------------------------------

diff | 5583 79241.93 700.7312 52358.27 77868.23 80615.64

------------------------------------------------------------------------------

mean(diff) = mean(earnings - parental_income) t = 113.0846

Ho: mean(diff) = 0 degrees of freedom = 5582

Ha: mean(diff) < 0 Ha: mean(diff) != 0 Ha: mean(diff) > 0

Pr(T < t) = 1.0000 Pr(|T| > |t|) = 0.0000 Pr(T > t) = 0.0000

. regress earnings SATscore

Source | SS df MS Number of obs = 5583

-------------+------------------------------ F( 1, 5581) = 384.34

Model | 9.9726e+11 1 9.9726e+11 Prob > F = 0.0000

Residual | 1.4481e+13 5581 2.5948e+09 R-squared = 0.0644

-------------+------------------------------ Adj R-squared = 0.0643

Total | 1.5479e+13 5582 2.7729e+09 Root MSE = 50939

------------------------------------------------------------------------------

earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

SATscore | 43.86644 2.237572 19.60 0.000 39.47992 48.25295

_cons | 50348.96 2632.26 19.13 0.000 45188.71 55509.22

------------------------------------------------------------------------------

. reg earnings private_school

Source | SS df MS Number of obs = 5583

-------------+------------------------------ F( 1, 5581) = 49.18

Model | 1.3520e+11 1 1.3520e+11 Prob > F = 0.0000

Residual | 1.5343e+13 5581 2.7492e+09 R-squared = 0.0087

-------------+------------------------------ Adj R-squared = 0.0086

Total | 1.5479e+13 5582 2.7729e+09 Root MSE = 52433

--------------------------------------------------------------------------------

earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | 9859.334 1405.936 7.01 0.000 7103.151 12615.52

_cons | 94970.35 1023.193 92.82 0.000 92964.5 96976.21

--------------------------------------------------------------------------------

. reg ln_earnings private_school

Source | SS df MS Number of obs = 5583

-------------+------------------------------ F( 1, 5581) = 54.95

Model | 13.0633654 1 13.0633654 Prob > F = 0.0000

 Residual | 1326.67616 5581 .237712984 R-squared = 0.0098

-------------+------------------------------ Adj R-squared = 0.0096

Total | 1339.73953 5582 .240010664 Root MSE = .48756

--------------------------------------------------------------------------------

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | .0969144 .0130734 7.41 0.000 .0712855 .1225433

_cons | 11.34294 .0095143 1192.19 0.000 11.32429 11.36159

--------------------------------------------------------------------------------

. reg ln_earnings private_school, r

Linear regression Number of obs = 5583

F( 1, 5581) = 55.09

Prob > F = 0.0000

R-squared = 0.0098

Root MSE = .48756

--------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | .0969144 .0130571 7.42 0.000 .0713173 .1225115

_cons | 11.34294 .0094084 1205.62 0.000 11.3245 11.36138

--------------------------------------------------------------------------------

. reg ln_earnings private_school SAT_score_100 , r

Linear regression Number of obs = 5583

F( 2, 5580) = 244.94

Prob > F = 0.0000

R-squared = 0.0790

Root MSE = .47024

--------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | .0060836 .0133909 0.45 0.650 -.0201677 .0323349

SAT_score_100 | .0448491 .0021677 20.69 0.000 .0405996 .0490985

_cons | 10.88145 .0243762 446.40 0.000 10.83366 10.92924

--------------------------------------------------------------------------------

. reg ln_earnings private_school SAT_score_100 log_parental_income , r

Linear regression Number of obs = 5583

F( 3, 5579) = 163.35

Prob > F = 0.0000

R-squared = 0.0790

Root MSE = .47028

-------------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

--------------------+----------------------------------------------------------------

private_school | -.0029083 .0225914 -0.13 0.898 -.0471962 .0413797

SAT_score_100 | .0446616 .0021923 20.37 0.000 .0403638 .0489595

log_parental_income | .0219677 .0444174 0.49 0.621 -.0651076 .109043

_cons | 10.67049 .4278156 24.94 0.000 9.831801 11.50917

-------------------------------------------------------------------------------------

. reg ln_earnings private_school SAT_score_100 log_parental_income female , r

Linear regression Number of obs = 5583

F( 4, 5578) = 292.03

Prob > F = 0.0000

R-squared = 0.1711

Root MSE = .44619

-------------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

--------------------+----------------------------------------------------------------

private_school | .0021291 .021453 0.10 0.921 -.0399272 .0441853

 SAT_score_100 | .0011903 .002803 0.42 0.671 -.0043046 .0066852

log_parental_income | .2032275 .0430109 4.73 0.000 .1189094 .2875455

female | -.3965791 .016206 -24.47 0.000 -.4283491 -.364809

_cons | 9.517342 .4099709 23.21 0.000 8.713639 10.32104

-------------------------------------------------------------------------------------

. reg ln_earnings private_school SAT_score_100 parental_income female , r

Linear regression Number of obs = 5583

F( 4, 5578) = 291.63

Prob > F = 0.0000

R-squared = 0.1708

Root MSE = .44626

---------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

----------------+----------------------------------------------------------------

private_school | .0109386 .0205335 0.53 0.594 -.029315 .0511922

SAT_score_100 | .0013245 .0028029 0.47 0.637 -.0041704 .0068193

parental_income | 8.89e-06 1.96e-06 4.54 0.000 5.05e-06 .0000127

female | -.3958131 .0162066 -24.42 0.000 -.4275845 -.3640418

_cons | 11.33993 .0413502 274.24 0.000 11.25887 11.42099

---------------------------------------------------------------------------------

. reg ln_earnings private_school SATscore log_parental_income female , r

Linear regression Number of obs = 5583

F( 4, 5578) = 292.03

Prob > F = 0.0000

R-squared = 0.1711

Root MSE = .44619

-------------------------------------------------------------------------------------
 | Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

--------------------+----------------------------------------------------------------

private_school | .0021291 .021453 0.10 0.921 -.0399272 .0441853

SATscore | .0000119 .000028 0.42 0.671 -.000043 .0000669

log_parental_income | .2032275 .0430109 4.73 0.000 .1189094 .2875455

female | -.3965791 .016206 -24.47 0.000 -.4283491 -.364809

_cons | 9.517342 .4099709 23.21 0.000 8.713639 10.32104

-------------------------------------------------------------------------------------

. reg ln_earnings private_school i.selectivity, r

Linear regression Number of obs = 5583

F(130, 5452) = 3.69

Prob > F = 0.0000

R-squared = 0.0731

Root MSE = .47724

--------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | .084962 .0131 6.49 0.000 .0592808 .1106433

selectivity |

2 | .0015045 .0824241 0.02 0.985 -.1600797 .1630887

3 | .0704616 .0962142 0.73 0.464 -.1181565 .2590798

4 | .0147495 .0908491 0.16 0.871 -.1633511 .1928501

5 | -.0002996 .080275 -0.00 0.997 -.1576706 .1570714

6 | -.0425216 .0848309 -0.50 0.616 -.2088241 .1237809

7 | .0267877 .0893841 0.30 0.764 -.1484408 .2020162

8 | -.0320163 .090258 -0.35 0.723 -.208958 .1449255

9 | -.0096629 .0838696 -0.12 0.908 -.1740809 .1547551

more.
. reg ln_earnings private_school SAT_score_100 i.selectivity, r

Linear regression Number of obs = 5583

F(131, 5451) = 5.97

Prob > F = 0.0000

R-squared = 0.1188

Root MSE = .46539

--------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | .0130906 .013489 0.97 0.332 -.0133532 .0395344

SAT_score_100 | .0386048 .0022894 16.86 0.000 .0341167 .043093

selectivity |

2 | -.0195507 .0770095 -0.25 0.800 -.1705201 .1314188

3 | .0402023 .0922389 0.44 0.663 -.1406227 .2210273

4 | .0074579 .0866375 0.09 0.931 -.1623863 .177302

5 | -.00495 .0749622 -0.07 0.947 -.1519058 .1420057

6 | -.0540988 .0811246 -0.67 0.505 -.2131354 .1049378

7 | .0180369 .0833236 0.22 0.829 -.1453105 .1813843

8 | -.0401523 .083794 -0.48 0.632 -.204422 .1241173

9 | -.0143939 .0779578 -0.18 0.854 -.1672224 .1384345

more.

. reg ln_earnings private_school SAT_score_100 log_parental_income i.selectivity, r

Linear regression Number of obs = 5583

F(132, 5450) = 5.93

Prob > F = 0.0000

R-squared = 0.1189
 Root MSE = .4654

-------------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

--------------------+----------------------------------------------------------------

private_school | -.0027884 .0226685 -0.12 0.902 -.0472277 .0416509

SAT_score_100 | .0382528 .0023192 16.49 0.000 .0337061 .0427994

log_parental_income | .0390974 .0445034 0.88 0.380 -.0481471 .1263418

selectivity |

2 | -.0197685 .0770779 -0.26 0.798 -.1708719 .131335

3 | .0404395 .0923554 0.44 0.661 -.1406139 .2214929

4 | .006501 .0866525 0.08 0.940 -.1633726 .1763746

5 | -.0049679 .0749004 -0.07 0.947 -.1518026 .1418668

6 | -.0540219 .0812991 -0.66 0.506 -.2134006 .1053568

7 | .0162386 .0834762 0.19 0.846 -.1474081 .1798852

8 | -.0402923 .0838514 -0.48 0.631 -.2046744 .1240899

9 | -.0146248 .0779829 -0.19 0.851 -.1675023 .1382528

more.

. reg ln_earnings private_school SAT_score_100 selectivity, r

Linear regression Number of obs = 5583

F( 3, 5579) = 181.81

Prob > F = 0.0000

R-squared = 0.0872

Root MSE = .46819

--------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------
private_school | .004186 .0133264 0.31 0.753 -.0219389 .030311

SAT_score_100 | .0406711 .0022558 18.03 0.000 .0362487 .0450934

selectivity | .0014163 .0001998 7.09 0.000 .0010246 .0018081

_cons | 10.85836 .024452 444.07 0.000 10.81043 10.9063

--------------------------------------------------------------------------------

. reg ln_earnings private_school SAT_score_100 i.selectivity, r

Linear regression Number of obs = 5583

F(131, 5451) = 5.97

Prob > F = 0.0000

R-squared = 0.1188

Root MSE = .46539

--------------------------------------------------------------------------------

| Robust

ln_earnings | Coef. Std. Err. t P>|t| [95% Conf. Interval]

---------------+----------------------------------------------------------------

private_school | .0130906 .013489 0.97 0.332 -.0133532 .0395344

SAT_score_100 | .0386048 .0022894 16.86 0.000 .0341167 .043093

selectivity |

2 | -.0195507 .0770095 -0.25 0.800 -.1705201 .1314188

3 | .0402023 .0922389 0.44 0.663 -.1406227 .2210273

4 | .0074579 .0866375 0.09 0.931 -.1623863 .177302

5 | -.00495 .0749622 -0.07 0.947 -.1519058 .1420057

6 | -.0540988 .0811246 -0.67 0.505 -.2131354 .1049378

7 | .0180369 .0833236 0.22 0.829 -.1453105 .1813843

8 | -.0401523 .083794 -0.48 0.632 -.204422 .1241173

9 | -.0143939 .0779578 -0.18 0.854 -.1672224 .1384345

more.