# There has been much interest in whether the presence of 401(k) pension plans, available to many U.S. workers, increases net

## Question:

There has been much interest in whether the presence of 401(k) pension plans, available to many U.S. workers, increases net savings. The data set 401KSUBS.RAW contains information on net financial assets (nettfa), family income (inc), a binary variable for eligibility in a 401(k) plan (e401k), and several other variables.
(i) What fraction of the families in the sample are eligible for participation in a 401 (k) plan?
(ii) Estimate a linear probability model explaining 401(k) eligibility in terms of income, age, and gender. Include income and age in quadratic form, and report the results in the usual form.
(iii) Would you say that 401(k) eligibility is independent of income and age? What about gender? Explain.
(iv) Obtain the fitted values from the linear probability model estimated in part (ii). Are any fitted values negative or greater than one?

(vii) The overall percent correctly predicted is about 64.9%. Do you think this is a complete description of how well the model does, given your answers in part (vi)?
(viii) Add the variable pira as an explanatory variable to the linear probability model. Other things equal, if a family has someone with an individual retirement account, how much higher is the estimated probability that the family is eligible for a 401 (k) plan? Is it statistically different from zero at the 10% level?

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Question Posted: April 21, 2016 04:51:53