6.14 Following on from the example in Section 6.6.1, the file hwage.dat contains another subset of the data used by labor economist Tom Mroz. The variables with which we are concerned are HW : husband's wage in 2006 dollars, I1E : husband's education attainment in years, IIA : husband's age, and CIT : a variable equal to 1 if living in a large city, otherwise 0.

(a) Estimate the model HW:h*gzHE*gzHA-te What effect do changes in the level of education and age have on wages?

(b) Does a RESET test suggest the model in part

(a) is adequate

(c) Add the variables HE" and HA- 10 the original equation and reestimate it. Describe the effect that education and age have on wages in this newly estimated mode!

(d) Does a RESET test suggest the model in part

(c) is adequate?

(e) Reestimate the model in part

(c) with the variable C/T included. What can you say about the level of wages in large cities relative to outside those cities?

(f) Do you think CIT should be included in the equation?
(g) For both the model estimated in part

(c) and the model estimated in part te evaluate the following four derivatives:
BHW (i)
for HE = 6 and HE = 15 SHE анн
Gij for HA = 35 and HA = 50 aHA Does the omission of CIT lead to omitted-variable bias? Can you suggest why"?