Consider the wage equation lnWAGE b1 b2EDUC b3EDUC2 b4EXPER b5EXPER2 b6EDUC EXPER b7HRSWK e where the

Consider the wage equation lnðWAGEÞ ¼ b1 þ b2EDUC þ b3EDUC2 þ b4EXPER þ b5EXPER2

þ b6ðEDUC  EXPERÞ þ b7HRSWK þ e where the explanatory variables are years of education, years of experience and hours worked per week. Estimation results for this equation, and for modified versions of it obtained by dropping some of the variables, are displayed in Table 6.4. These results are from the 1000 observations in the file cps4c_small.dat.

(a) Using an approximate 5% critical value of tc ¼ 2, what coefficient estimates are not significantly different from zero?

(b) What restriction on the coefficients of Eqn (A) gives Eqn (B)? Use an F-test to test this restriction. Show how the same result can be obtained using a t-test?