Question: Use the data in WAGE2 to estimate a simple regression explaining monthly salary (wage) in terms of IQ score (IQ). (i) Find the average salary

Use the data in WAGE2 to estimate a simple regression explaining monthly salary (wage) in terms of IQ score (IQ).

(i) Find the average salary and average IQ in the sample. What is the sample standard deviation of IQ? (IQ scores are standardized so that the average in the population is 100 with a standard deviation equal to 15.)

(ii) Estimate a simple regression model where a one-point increase in IQ changes wage by a constant dollar amount. Use this model to find the predicted increase in wage for an increase in IQ of15 points. Does IQ explain most of the variation in wage?

(iii) Now, estimate a model where each one-point increase in IQ has the same percentage effect on wage. If IQ increases by15 points, what is the approximate percentage increase in predicted wage?

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