Do liberal arts colleges pay economists more than they pay other professors? To find out, we looked
Question:
Where:
Si = the salary of the ith college professor
Mi = a dummy variable equal to 1 if the ith professor is a male and 0 otherwise
Ai = a dummy variable equal to 1 if the ith professor is African American and 0 otherwise
Ri = the years in rank of the ith professor
Ti = a dummy variable equal to 1 if the ith professor teaches economics and 0 otherwise
a. Carefully explain the meaning of the estimated coefficient of M.
b. The equation indicates that African Americans earn $426 more than members of other ethnic groups, holding constant the other variables in the equation. Does this coefficient have the sign you expected? Why or why not?
c. Is R a dummy variable? If not, what is it? Carefully explain the meaning of the coefficient of R.
d. Whats your conclusion? Do economists earn more than other professors at liberal arts colleges? Explain.
e. The fact that the equation ends with the notation + indicates that there were more than four independent variables in the equation. If you could add a variable to the equation, what would it be? Explain.
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