) Suppose a study analyzes the determinants of wages of people living in the US. Regressions are...
Question:
) Suppose a study analyzes the determinants of wages of people living in the US. Regressions are estimated with the outcome variable measuring hourly wage. Explanatory variables in the regression equation include: each person's race (with African Americans coded as 1 and Caucasians 0), and their education level (elementary, high school, college, graduate). Here are the results for two equations that were estimated: (1) Wage = 25 - 4 x race SE: (1.2) R^2=0.08
(2) Wage = 18 - 2 x race + 7 x education level SE: (1.5) (0.8) R^2=0.42
a. Evaluate the coefficient of the race variable in Equation 1. Discuss the sign, size, and significance.
b. Evaluate the coefficient of the race variable in Equation 2. Discuss the sign, size, and significance.