Homework_3 - PAM 305 Introduction to Multivariate Analysis...

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PAM 305 - Introduction to Multivariate Analysis Fall 2006 Homework 3 Due date: September 29th Question 1 For the computer exercises in STATA we will use the same data set WAGE1.dta. Suppose that the true model is log( wage ) = β o + β 1 educ + β 2 exper + β 3 tenure + u (1) Obtain the sample regression function d log( wage ) = ˆ β o + ˆ β 1 educ + ˆ β 2 exper + ˆ β 3 tenure (2) a. As in the simple linear regression model, the coefficients have a percent- age interpretation. The only difference is that now they have a ceteris paribus interpretation. Interpret ˆ β 1 . b. If we take two people with the same levels of experience and job tenure, what is the percentage difference in predicted wages if their education differs by 1 year? c. What is the estimated effect on wages when an individual stays at the same firm for another year? d. Why we should not be surprised that the simple linear regression d log( wage ) = ˆ β o + ˆ β 1 educ and the multiple regression in (2) produce different estimates of ˆ β 1 1
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e. Consider estimating by OLS the model
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