EXERCISE 4 - ANSWER

Households speaking which language have the highest total monthly expenditure (controlling for total monthly income)? The lowest total monthly expenditure? By what amount do households from these two language groups differ on average in their expenditure at all levels of income?

Before running a regression, we want to see how STATA will code the languages.

tab lang_cod

         21 |
  :language |
       code |      Freq.     Percent        Cum.
------------+-----------------------------------
   01-engli |        105       10.61       10.61
   02-afrik |        132       13.33       23.94
   03-xhosa |        178       17.98       41.92
    04-zulu |        203       20.51       62.42
   05-tswan |        110       11.11       73.54
   06-north |         99       10.00       83.54
   07-south |         64        6.46       90.00
   08-venda |         14        1.41       91.41
   09-shang |         37        3.74       95.15
   10-swazi |         26        2.63       97.78
   11-ndebe |         15        1.52       99.29
   12-other |          7        0.71      100.00
------------+-----------------------------------
      Total |        990      100.00

We now know that STATA will code English as 1, Afrikaans as 2, Xhosa as 3, etc. Now we can run the regression with totmexp as the dependent variable and totminc and lang_cod as the independent variables. With a dozen categories within lang_cod, it especially makes sense to use the xi option in running this regression.

xi: regress totmexp totminc i.lang_cod

i.lang_cod            Ilang_1-12   (naturally coded; Ilang_1 omitted)
  Source |       SS       df       MS                  Number of obs =     956
---------+------------------------------               F( 12,   943) =   74.03
   Model |  1.3469e+09    12   112241344               Prob > F      =  0.0000
Residual |  1.4298e+09   943  1516219.62               R-squared     =  0.4851
---------+------------------------------               Adj R-squared =  0.4785
   Total |  2.7767e+09   955  2907530.09               Root MSE      =  1231.3
------------------------------------------------------------------------------
 totmexp |      Coef.   Std. Err.       t     P>|t|       [95% Conf. Interval]
---------+--------------------------------------------------------------------
 totminc |   .1274279   .0090614     14.063   0.000       .1096451    .1452107
 Ilang_2 |  -939.8534   170.0297     -5.528   0.000      -1273.534   -606.1729
 Ilang_3 |  -2666.121   164.0949    -16.247   0.000      -2988.155   -2344.088
 Ilang_4 |  -2257.174    159.787    -14.126   0.000      -2570.753   -1943.595
 Ilang_5 |  -2345.244   178.4947    -13.139   0.000      -2695.537   -1994.951
 Ilang_6 |  -2502.428   182.6328    -13.702   0.000      -2860.842   -2144.015
 Ilang_7 |  -2556.602   205.0399    -12.469   0.000      -2958.989   -2154.215
 Ilang_8 |  -2465.706   355.1803     -6.942   0.000      -3162.741   -1768.671
 Ilang_9 |  -2509.393   243.0882    -10.323   0.000       -2986.45   -2032.337
Ilang_10 |  -2208.885    280.332     -7.880   0.000      -2759.032   -1658.738
Ilang_11 |  -2395.913   344.7786     -6.949   0.000      -3072.535   -1719.291
Ilang_12 |  -823.2165    519.294     -1.585   0.113      -1842.322    195.8891
   _cons |   3307.052   136.4961     24.228   0.000       3039.181    3574.923
------------------------------------------------------------------------------

Notice that English (Ilang_1) was dropped from the regression; thus, it is the category to which households speaking all other languages are compared. Being that all of the coefficients for the other languages are negative, it should be obvious that English speaking households having the highest average total monthly expenditure. Households speaking the language with the "highest" negative coefficient thus have the lowest total monthly expenditure on average. This is Xhosa, with a coefficient of -2666.12. The coefficient for Xhosa represents the average expenditure difference between English and Xhosa-speaking households at all levels of income.

 

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