# Suppose the following model describes the relationship between annual salary (salary) and the number of previous years of labor market experience (exper): log(salary) = 10.6 + .027 exper. (i) What is salary when exper = 0? When exper = 5? (ii) Use equation (A.28) to approximate the percentage increase in salary when exper increases by five years. (iii) Use the

Chapter 19, Problems #7

Suppose the following model describes the relationship between annual salary (salary) and the number of previous years of labor market experience (exper):

log(salary) = 10.6 + .027 exper.

(i) What is salary when exper = 0? When exper = 5?

(ii) Use equation (A.28) to approximate the percentage increase in salary when exper increases by five years.

(iii) Use the results of part (i) to compute the exact percentage difference in salary when exper = 5 and exper = 0. Comment on how this compares with the approximation in part (ii).

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Related Book For

## Introductory Econometrics A Modern Approach

7th Edition

Authors: Jeffrey Wooldridge

ISBN: 9781337558860