Assignment3_Answers - Assignment3- Answers 1(a) Mean...

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Assignment3- Answers 1- (a) Mean earnings of males: 570.70-170.2(0) = $570.70 Mean earnings of females: 570.70-170(1) = $399.98. The percent of average female income to male income: 399.98/570.70 = 70.1% in the sample. (b) As individual becomes one year older, they earn $5% more, on average. Females earn significantly less money on average of about $170 and for a given age. 13.5% of the earnings variation is explained by the regression. The intercept of 323.70 does not have any economic meaning. The first partial slope indicates an expected negative sign because females tend to earn less on average than males. The second partial slope indicates a positive expected sign which reflects the relation between age and earnings. As the person gets one year older earnings are expected to increase by $5.15. 2 R has increased as the age regressor was added to the regression, though it is fairly low and it indicates that we need to add more variables in order to increase the explanation of the model. The SER has decreased as the age regressor was included in the model. However it is still too large and it indicates that some important factors are still missing in this model. A 40-year old female earns 323.70-169.78(1) +5.15(40) = $359.92, while a 20-year old male makes 323.70-169.78(0) + 5.15(20) = $426.70. The model proves that there is a discrimination against females. There is somewhat more evidence here, since age has
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This note was uploaded on 10/30/2008 for the course ECON 322 taught by Professor Francisco during the Spring '07 term at Rutgers.

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Assignment3_Answers - Assignment3- Answers 1(a) Mean...

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