Question: Use the data set CPS04 described in Empirical Exercise 4.1 to answer the following questions. a. Run a regression of average hourly earnings (AHE) on

Use the data set CPS04 described in Empirical Exercise 4.1 to answer the following questions.

a. Run a regression of average hourly earnings (AHE) on age (Age). What is the estimated intercept? What is the estimated slope?

b. Run a regression of AHE on Age, gender (Female), and education (Bachelor). What is the estimated effect of Age on earnings? Construct a 95% confidence interval for the coefficient on Age in the regression.

c. Are the results from the regression in

(b) substantively different from the results in

(a) regarding the effects of Age and AHE? Does the regression in

(a) seem to suffer from omitted variable bias?

d. Bob is a 26-year-old male worker with a high school diploma. Predict Bob's carnings using the estimated regression in (b). Alexis is a 30- year-old female worker with a college degree. Predict Alexis's earnings using the regression.

c. Compare the fit of the regression in

(a) and

(b) using the regression standard errors, R and R2. Why are the R2 and R so similar in regres- sion (b)?

f. Are gender and education determinants of earnings? Test the null hypothesis that Female can be deleted from the regression. Test the null hypothesis that Bachelor can be deleted from the regression. Test the null hypothesis that both Female and Bachelor can be deleted from the regression.

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