Question: This question assumes access to a kernel regression program or other nonparametric smoother. Use the complete sample of the Section 4.6.4 data on natural logarithm

This question assumes access to a kernel regression program or other nonparametric smoother. Use the complete sample of the Section 4.6.4 data on natural logarithm of health expenditure (y) and natural logarithm of total expenditure (x).

(a) Obtain the kernel regression density estimate for health expenditure, choosing a good bandwidth by eyeballing and trial and error. State the bandwidth chosen.

(b) Given part (a), does health appear to be a normal good?

(c) Given part (a), does health appear to be a superior good?

(d) Compare your nonparametric estimates with predictions from linear and quadratic regression.

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