Estimated equation in the standard reporting

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Reference no: EM13930390

WAGE        monthly earnings
HOURS       weekly hours
IQ IQ         score
KWW         knowledge of world work score
EDUC        years of education
EXPER       years of work experience
TENURE     years with current employer
AGE          age in years
MARRIED   =1 if married
BLACK       =1 if black
SOUTH       =1 if live in south
URBAN       =1 if live in SMSA
SIBS          number of siblings
BRTHORD   birth order
MEDUC       mother's education
FEDUC        father's education
LWAGE       natural log of wage

Estimate the following multiple regression model:

LOG(WAGE) = β₁ + β₂EDU + β₃EXPER + β₄TENURE + β₅MARRIED + β₆URBAN + β₇SOUTH + β₈BLACK + u

1. Write out the estimated equation in the standard reporting format with standard errors below the estimated coefficients.

2. Discuss the estimated coefficients, including their interpretations, signs, and statistical significance (using a 5% significance level).

3. What percentage of the variation in the monthly earnings is explained by the regression? What is the estimate of the residual variance?

4. Using a 5% significance level, test the overall significance of the regression. Report the F-statistic and its p-value.

5. Holding other factors fixed, what is the approximate difference in monthly salary between blacks and nonblacks? Is this difference statistically significant?

6. Add the variables EXPER2 and TENURE2 to the equation and show that they are jointly insignificant at even the 20% level.

7. Extend the original model to allow the return to education to depend on race and test whether the return to education does depend on race.

8. Again, start with the original model, but now allow wages to differ across four groups of people: married and black, married and nonblack, single and black, and single and nonblack. What is the estimated wage differential between married blacks and married nonblacks?

Reference no: EM13930390

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