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?