Type the following command in Stata to load the MURDER dataset:

use http://fmwww.bc.edu/ec-p/data/wooldridge/murder, clear

The dataset contains three years of data (1987, 1990, and 1993) for all fifty states plus the District of Columbia, where:

mrdrte is the number of murders per 100,000 people

exec is the total number of executions in the past three years

unem is the annual unemployment rate

For this question, use the following command to keep only the observations from 1990:

keep if year==90

Using OLS, regress the murder rate (mrdrte) on the number of executions (exec). Do executions have a statistically significant impact on the murder rate?

Generate a scatter plot with the murder rate on the vertical axis and the number of executions on the horizontal axis. Do you see any outlying observations?

The observation with the highest murder rate is the District of Columbia (DC). Try running the regression from part (a) using a least absolute deviation model. Also, rerun it using OLS, but excluding DC (HINT: run your regression on the observations where state~="DC"). Does DC have a large impact on the regression results?

Answer rating: 100% (QA)

ANSWER An outlier is generally due to statistical noise and not to any fundamental difficulty with t... View the full answer