Suppose that you estimate the following female labor supply relationship a
Suppose that you estimate the following female labor supply relationship:
a. Interpret the coefficient on after-tax wages. What does this coefficient imply about the effect of increasing wages from $6 to $10 per hour on labor supply?
b. What can we learn from this estimate about the income and substitution effects of wages on labor supply?
c. How might this coefficient estimate be biased? Explain.
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