OLS_Wage_Equations_Web_toExample1_2perPage

# OLS_Wage_Equations_Web_toExample1_2perPage - Econ 1002...

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Unformatted text preview: Econ 1002: Applied Economics Matthew Wakefield University College London and Institute for Fiscal Studies m.wakefield (at) ucl.ac.uk Jan - Mar 2009 Oﬃce Hour: Tues 3-3.55, Room 209, Drayton www.ucl.ac.uk/economics/degree-courses/undergraduate/course-list/courses/econ1002 coursepage or link from: www.ucl.ac.uk/economics/degree-courses/undergraduate/course-list/courses/applied-economics Thanks to the previous two lecturers, Professors Ian Preston and James Banks, for much of the content of this course. Econ 1002 Matthew Wakefield Outline Simple Wage Equation Regression Terminology OLS Setup Graphical Estimators Example 1 Outline II: An Introduction to Ordinary Least Squares (OLS) Regression Using the example of Wage Equations 1 A Simple Wage Equation 2 Regression Terminology 3 OLS Setup Graphical Interpretation Estimators 4 Example 1 Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 2 / 16 Econ 1002 Matthew Wakefield Outline Simple Wage Equation Regression Terminology OLS Setup Graphical Estimators Example 1 Simple Wage Equation We expect that more educated individuals should have higher wages: Economic theory suggests more educated individuals should have higher wages (ceteris paribus). Education increases productivity and/or Education is a signal of high productive ability Individuals would be unlikely to pay fees & forgo earnings if it did not We can investigate whether: Education does raise earnings and By how much? using cross sectional data on education and wages Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 3 / 16 Econ 1002 Matthew Wakefield Outline Simple Wage Equation Regression Terminology OLS Setup Graphical Estimators Example 1 Simple Wage Equation Our empirical model is a stylised representation of the process generating wages. We might start from: ln w i = α + β e i (1) Where ln w i is the (natural) logarithm of the hourly wage for individual i e i is years of formal schooling for individual...
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OLS_Wage_Equations_Web_toExample1_2perPage - Econ 1002...

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