This question tests you on OLS regression and probit and logit regressions.

Suppose you collect data from a survey on wages, education, experience and gender. In addition, you ask for information about smoking.

1) Form an equation that would allow you to estimate the effects of smoking on wage while controlling for other factors. You should be able to make statement such as ''smoking 1 more time per day is estimated to change wage by x%."

2)Form a model that would allow you to test whether smoking has different effects on wages for men and women. What kind of test will you use to test the null hypothesis that there are no differences in the effects of smoking for men and women?

3) Suppose you think it is better to measure smoking by putting people into one of our categories: nonsmoker, light smoker, moderate smoker, and heavy smoker. Form a model that allows you to estimate the effects of smoking on wage. Explain in detail how to test the null hypothesis that smoking has no effect on wages.