Compare the first regression estimate in Problem 2 with the regression estimate in Problem 4.

a. Is there an omitted variable bias when the full-time variable is not included? Explain.

b. What can be said about the correlation between age and full-time employment? Explain.

Problem 2

Suppose that a least squares regression yields the following estimate:

where W is the hourly wage rate (in dollars)
and A is the age (in years).
A second regression from another group of workers yields this estimate:

Problem 4

Suppose you have information on which of the 13 randomly selected teenage workers in the fast-food industry worked part-time and which worked fulltime.

Variable F_i is equal to 1 if the worker is employed full time, and it is equal to zero otherwise. With this information, you estimate the following relationship between wages, age, and full-time employment:

Transcribed Image Text:

W; = -1 + 0.3A;