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Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework...

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Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26 th . The purpose of this homework is twofold: 1) to introduce you to the Current Population Survey (CPS) and 2) to have you use the CPS to estimate a wage equation. To begin, go to https://cps.ipums.org/cps/. ipums is a service that allows individuals to download individual-level data from many different CPS administrations. Start by clicking “Browse and Select Data” which appears on the left-side of the ipums webpage. If you are successful, you will see: There are two CPS units of observation: the household and the individual (or, in CPS terms, the “person”). Click on “person” (just above the “start here” arrows. You will see:
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Page 1: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

Economics 445: Economics of Education Homework #2

This homework is due on Tuesday, January 26th. The purpose of this homework is twofold: 1) to introduce you to the Current Population Survey (CPS) and 2) to have you use the CPS to estimate a wage equation. To begin, go to https://cps.ipums.org/cps/. ipums is a service that allows individuals to download individual-level data from many different CPS administrations. Start by clicking “Browse and Select Data” which appears on the left-side of the ipums webpage. If you are successful, you will see:

There are two CPS units of observation: the household and the individual (or, in CPS terms, the “person”). Click on “person” (just above the “start here” arrows. You will see:

Page 2: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

Let’s choose “Education Supplement” from this list. I get:

Page 3: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

A few things to note: 1) the data in the educational supplement is not asked in all surveys. These variables are asked only in each October (the X’s). Remember, the CPS is a labor market survey—some variables having to do with the labor market are asked each month whereas others, which are likely to change slowly, are asked less frequently. 2) To select data, click on the yellow plus sign on the left. You will know you are successful when the yellow plus turns into a green check mark and your data cart holds a new variable. 3) You can also find variables by using the “search” function which looks at variable names and the variable descriptions. For this homework, select the variables “HOURWAGE” and “EDUC” Finally, select a third variable (your choice). When you are done, you should see something like this:

Page 4: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

In this case, my third variable is marital status. To retrieve your data, click on the green “view cart” in the data cart. You should see:

Notice all three of my variables exist in each month of the data so later, when I select my data, I can use any sample. Let’s do that now. Click on “Add more samples” and get:

Page 5: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

I’m going to select 2014. You should be careful to select data that you have all x’s for (you might need to select the “Basic Monthly” tabs to do this). After selection, click on “Submit sample selections.” You will see:

Page 6: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

The three that I selected are at the bottom of this list. The first set of data are pre-populated in most ipums data requests. Click on the “Create data extract” tab and then “submit extract.” You will be asked to submit an e-mail address and password (you will likely have to create an account at this point—don’t worry, its free). When you are completely successful, you will see something like:

Notice, I have three files because I have downloaded three times in the last few weeks. You will likely have only one file. If you are going to use this in Stata, then download the STATA “command file” to your computer. You don’t yet have the data—this will be uploaded to your account and an e-mail will be sent to you when this occurs. When your data does arrive, you will get something that says “Data” under the data column:

Click on the “data” file and save it to your computer. You should now have two files on your computer. The data file comes as a “zipped” file (usually with the extension .dat.gz). You need to “unzip” this file and store the unzipped file in a folder where you won’t lose it. I created a folder on my c-drive called IPUMS and put both files into there (C:\IPUMS). This will be helpful in the next step. The next step is to get the IPUMS data into stata. This turns out to be pretty easy. First, open stata and under the “Window” menu select “do file editor.” A do file is simply a text file that is integrated into stata that can execute stata’s commands. In the do file editor, under the file menu, open the stata command file you downloaded (probably named something like “cps_0001”). It should look something like

Page 7: Economics 445: Economics of Education Homework #2 · Economics 445: Economics of Education Homework #2 This homework is due on Tuesday, January 26th. The purpose of this homework

We need to make one change to this file so that it runs the new data. We need to tell stata where the data file is. In my case, I stored it in c:\IPUMS so I’m going to insert the code:

cd "c:\IPUMS" on line 3 (just below the green text at the top of the file). Select all of this .do file (with your additional line of code). I select all with ctrl-a. Then execute this selection (in the do file, the icon that looks like a piece of paper with writing on it and a blue arrow on the bottom right corner). This will setup all of your data. Be sure to save it when you are done. Your assignment is to estimate the relationship between education and wages. What do you find? Now, add your additional variable to this regression. What do you find? Can you learn about the relationship between your third variable and education? What?


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