Are rent rates influenced by the student population in a college town? Let rent be the average monthly rent paid on rental units in a college town in the United States. Let pop denote the total city population, avginc the average city income, and pctstu the student population as a percentage of the total population. One model to test for a relationship is ln(rent) = β0 + β1ln(pop) + β2ln(avginc) + β3pctstu + u.
a. Use rental.dta to estimate the model by OLS using data for 1990 only and report the results. Use non-robust standard errors.
b. Difference the equation by calculating the difference between 1990 and 1980 for each city and estimate by OLS. Report the estimates. Use non-robust standard errors.
c. Interpret the estimate for β3. Does the relative size of the student population appear to affect rental prices?
d. Estimate the model by fixed effects using city and time fixed effects and report your estimates. Use non-robust standard errors. Compare these results to those in question (b) and comment.