Continue with the wage data given in Table 9-2 (found on the textbook's Web site) and now consider the following regressions:
wagei = A1 + A2 experiencei + ui
In wagei =B1 + B2 In experiencei + ui
a. Estimate both regressions.
b. Obtain the absolute and squared values of the residuals for each regression and plot them against the explanatory variable. Do you detect any evidence of heteroscedasticity?
c. Verify your qualitative conclusion in part (b) with the Glejser and Park tests.
d. If there is evidence of heteroscedasticity, how would you transform the data to reduce its severity? Show the necessary calculations.