Over a period of several years a local school district in Illinois followed their students through high school, college, and graduate school to determine the impact of education on lifetime earnings. A portion of the data collected in the study is shown here. EDU is years of education and INC is annual income measured in thousands of dollars.

a. Construct the earnings function in which income is explained on the basis of educational levels. Comment on results.

b. What is your estimate of mean earned income for someone with

(i) only nine years of education; (ii) a graduate degree consisting of four years of undergraduate schooling and a two-year master's degree?

c. What happens to the estimated income for someone who gets one additional year of education?

Transcribed Image Text:

EDU 12 12 16 16 16 15 14 12 8 12 13 INC 110 98 114 105 111 132 87 74 52 115 107