The sudden growth of homelessness in the 1980s is often attributed by social
science researchers to the release of many individuals from mental hospitals during that
period. Other factors, such as the harsh weather in the winter time and the change in
prison population may be at play in the meanwhile.
Housing economists, however, are aware that housing market conditions and
economic circumstances are also significant contributors to this problem. In your research
paper, you are asked to argue from the standpoint of housing economists that these
missing factors in the traditional social science studies are influential for the surge of
The dataset to be used in your research paper is available on Blackboard, named
as “homeless.dta”. It covers 273 urban areas and is based on the 1990 U.S. Census. The
variables contained in this dataset are defined below:
HMLSS Natural log of the homelessness rate 1990
VAC Natural log of the rental vacancy rate 1990
GROSSR Natural log of the median gross rent 1990
MDHHINC Natural log of the median household income 1990
RNTINCRT Natural log of the rent/income ratio 1990
UNEMPLOY Natural log of the unemployment rate 1990
MHOSP The change in mental hospital population per 100,000 people
PRISON The change in prison population per 100,000 people 1981-1992
JANTEMP Natural log of the average January temperature
SSIPOP Natural log of the city’s supplemental security income recipients
POP Natural log of the city’s total population
Your research paper, no less than 5-page long, is supposed to follow these steps:
1. An introduction to the question to be addressed: You are suggested to perform
some Internet google search to acquire the background information on the
situation of homelessness rate in the 1980’s.
2. Using the dataset, run a brief OLS regression of the homelessness rate on the noneconomic
variables to support the findings by social science researchers.
3. From the viewpoint of housing economists, propose a conjecture regarding the
relationship between homelessness rate and three or more economic variables
available in the dataset. Explain your conjecture based on the economic theories
you have learned.
Econ 382 Prof. Zhao
4. Present the descriptive statistics of those variables in your conjecture. Use scatter
diagram to indicate the direction of the possible relationship between homeless
rate and these variables.
5. Propose a linear population model where the economic variables in Step 3 are
added into the model in Step 2. Explain carefully the parameters involved.
6. Report the OLS estimation results of your new model.
7. Conduct hypothesis tests on the individual and joint significance of those newlyadded
8. Investigate the possible problems of your OLS estimator for the model in Step 5.
You may want to consider the problems due to endogeneity or heteroskedasticity.
Propose possible approaches to address these issues.
9. Discuss the policy implications of your results.
A writing sample on a different topic by a student during the spring 2005 is
available on Blackboard. See section 4.6 of Wooldridge regarding the appropriate form
for presenting your econometric results. STATA is the program recommended for your
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