Suppose the following linear probability model
Y = 0.708 + 0.201M, n=1,989, R2=.049.
(0.018) (0.020)
Where y=1 if mortgage approved, M=1 if men, etc.
1. What is the probability of mortgage approval for a typical maleapplicant?
2. What is the probability of mortgage approval for a typicalfemale applicant?
3. Is the discrimination based on gender significant?
4. What are the problems of this model?
5. What other variables do you think should be added in the model?And if the variables were to be added, what happens to thecoefficient of M?
