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pam 310 hw1

# pam 310 hw1 - Julie Melamud PAM 310 1 a See log file b The...

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Julie Melamud PAM 310 February 13, 2008 1) a. See log file b. The assumption of homoskedasticity is not realistic for this data set because by looking at the graph below, you could see that the variance is not constant and the spread seems to vary with the amount of education. With more years of education, variance is increasing, which suggests that the assumption of homoscedasticity does not hold. Wage V. Education 0 5 10 15 20 25 0 5 10 15 20 years of education average hourly earnings Fitted values c. wage = b0 + b1 educ wage = -0.9049 + 0.5413(16)= \$.7.76 The estimated wage in 1976 when educ=16 is \$7.7569 or \$7.76. \$7.76 x 2.82= In 1997, the estimated wage is \$21.8744 or \$21.87. d. One more year of education increases the hourly wage by 0.541359 (or \$0.54). Four years of education increase the predicted hourly wage by about \$2.1654 (or \$2.16)

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No, the change in hourly wage due to one extra year of education does not depend on the initial level of education because it is evident that another year of education increases the wage by the same amount, regardless of what the initial level is.
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pam 310 hw1 - Julie Melamud PAM 310 1 a See log file b The...

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