Consider the following two regression models for the log earnings of German and foreign male workers:...
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Consider the following two regression models for the log earnings of German and foreign male workers: Model 1: Model 2: Yi= a + Fi + Ei, Yi a2 + 3 Fi + 22, +Ei, where F is a dummy variable that takes on the value 1, if worker i is a foreign worker and 0, otherwise. yi represents log gross earnings and zi is a vector of other explanatory variables such as schooling and experience. 1. What is an interpretation for the coefficients and 32 in the two models? 2. Consider now a third specification: Model 3: Yi = a3 +33 Fi + ziy + (Fizi)'d3 + Ei (i) How can you interpret the coefficient vector 63? (ii) What is the difference between specifications 2 and 3? 3. Show that Model 3 can be estimated by two separate regressions. Consider the following two regression models for the log earnings of German and foreign male workers: Model 1: Model 2: Yi= a + Fi + Ei, Yi a2 + 3 Fi + 22, +Ei, where F is a dummy variable that takes on the value 1, if worker i is a foreign worker and 0, otherwise. yi represents log gross earnings and zi is a vector of other explanatory variables such as schooling and experience. 1. What is an interpretation for the coefficients and 32 in the two models? 2. Consider now a third specification: Model 3: Yi = a3 +33 Fi + ziy + (Fizi)'d3 + Ei (i) How can you interpret the coefficient vector 63? (ii) What is the difference between specifications 2 and 3? 3. Show that Model 3 can be estimated by two separate regressions.
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1 B1 in Model 1 measures the average difference in log earnings between German and foreign male w... View the full answer
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Business Analysis Valuation Using Financial Statements
ISBN: 978-1111972301
5th edition
Authors: Paul M. Healy
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