Table 4 records the hourly wage rate (in U.S. Dollars), education (in years) , and experience...
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Table 4 records the hourly wage rate (in U.S. Dollars), education (in years) , and experience (in years) for a random sample of 10 individuals. The wage rate is assumed to be a linear function of the education and experience for an individual. The wage rate equation is given as: W₁ B1 +₂Ei + B3X₁ + Ui where W is the wage rate, E is education, X is experience, u is a random error term, and i indexes the individual. Table 4: Wage Rate, Education, and Experience i 1 2 3 W₁ Ei Xi 18.65 16 35 17.30 12 38 99.00 16 33 4 40.00 18 24 5 12.27 13 1 6 21.16 21 30 7 14.00 16 37 8 72.13 18 8 9 31.25 13 7 10 12.50 16 8 Based on the data in Table 4: a. Estimate the parameters of the wage rate equation by Ordinary Least Squares (OLS). (14 marks) b. Interpret the estimated model. (6 marks) Table 4 records the hourly wage rate (in U.S. Dollars), education (in years) , and experience (in years) for a random sample of 10 individuals. The wage rate is assumed to be a linear function of the education and experience for an individual. The wage rate equation is given as: W₁ B1 +₂Ei + B3X₁ + Ui where W is the wage rate, E is education, X is experience, u is a random error term, and i indexes the individual. Table 4: Wage Rate, Education, and Experience i 1 2 3 W₁ Ei Xi 18.65 16 35 17.30 12 38 99.00 16 33 4 40.00 18 24 5 12.27 13 1 6 21.16 21 30 7 14.00 16 37 8 72.13 18 8 9 31.25 13 7 10 12.50 16 8 Based on the data in Table 4: a. Estimate the parameters of the wage rate equation by Ordinary Least Squares (OLS). (14 marks) b. Interpret the estimated model. (6 marks)
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