You are considering the following regression: wage = a + aMale + u where wage is...

  

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You are considering the following regression: wage = a₁ + a₂Male + u where wage is the wage rate ($ per hour) and male is a dummy variable that takes on a value of 1 if the worker is male and o if the worker is female. a) Estimate the model above in EViews (Be sure to name and save equation in EViews) [2 marks] b) How would you interpret the estimate of a₂? [3 marks] c) Based on these estimates, what is the average wage rate of males and females? [2 marks] d) Your team-mate thinks the model is flawed, as a "female" dummy variable is omitted from the model. Briefly comment on the validity of this criticism. [3 marks] Upon inspection, you realised that your regression model is plagued with omitted variable bias and functional misspecification. As such, you revise your model as follows: In (wage) = a₁ + a₂Male + a,Edu+ a Exp + a,Exp² + u 3 where Edu is the number of years of years of formal education completed and Exp is the number of years of working experience. e) Why is this functional form appropriate? f) How would you interpret a, in the revised model? [5 marks] [3 marks] You are considering the following regression: wage = a₁ + a₂Male + u where wage is the wage rate ($ per hour) and male is a dummy variable that takes on a value of 1 if the worker is male and o if the worker is female. a) Estimate the model above in EViews (Be sure to name and save equation in EViews) [2 marks] b) How would you interpret the estimate of a₂? [3 marks] c) Based on these estimates, what is the average wage rate of males and females? [2 marks] d) Your team-mate thinks the model is flawed, as a "female" dummy variable is omitted from the model. Briefly comment on the validity of this criticism. [3 marks] Upon inspection, you realised that your regression model is plagued with omitted variable bias and functional misspecification. As such, you revise your model as follows: In (wage) = a₁ + a₂Male + a,Edu+ a Exp + a,Exp² + u 3 where Edu is the number of years of years of formal education completed and Exp is the number of years of working experience. e) Why is this functional form appropriate? f) How would you interpret a, in the revised model? [5 marks] [3 marks]

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You are considering the following regression wage a1a2 Male u where wage is the wage rate per hour and male is a dummy variable that takes on a value of 1 if the worker is male and o if the worker is ... View the full answer