Fox Module 22: Generalized linear models, discrete and continuous data
(The attached PDF file has better formatting.)
Homework assignment: Education and Auto Accidents
The homework assignment follows the discussion forum reading for this module.
We fit a linear model to three groups of drivers:
Years of Schooling
Auto Accidents per 100 Drivers
The X value is the years of schooling.
The Y value is the number of auto accidents per 100 drivers.
The table shows that drivers with
8 years of schooling (elementary school) have claim frequencies of 15%.
12 years of schooling (high school) have claim frequencies of 8%.
16 years of schooling (college) have claim frequencies of 3%.
We compare GLMs with different distributions of the error term.
Normal distribution with a constant variance.
Assume each year of schooling has the same linear effect on claim frequency.
We fit a straight line to the three points.
The variance of the error term depends on the GLM.
A. Which model gives the higher claim frequency for drivers with eight years of schooling?
B. Which model gives the higher claim frequency for college educated drivers?
C. Why might a linear model not be proper for these data? How does decreasing marginal utility affects the slopes? If a driver with 9 years of schooling has an expected claim frequency 1 percentage point less than a driver with 8 years of schooling, should the difference from 12 to 13 years of schooling be more or less than 1 percentage point?
D. How do actuaries treat class dimensions like years of schooling? Do actuaries treat this as a quantitative or qualitative class dimension?