10.5 0'U sing your computers oftware,a nd the 50 observationso n savings( y), income {.'.

and averaged income (z) in savings.dat

(a) Estimatea least squaresr egressiono f savingso n income.

(b) Estimate the relation between savings and income (x) using the instrument.

variables estimator, with instrument z, using econometric software designed

f, :

instrumental variables, or two-stage least squares, estimation.

(c) Using the steps outlined in Section 10.4.I, carry out the Hausman test (via a:

artificial regression) for the existence of correlation between r and the rando:

disturbance e.

(d) Use two least squaresr egressionst o obtain the lVestimates in part (b). Compar.

the estimates, standard errors, and /-statistics to those in part

(b) and comment .'.

the differences.