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Hw6 - Greg Smith Dr Cuellar Econ 317 Problem Set#6 a...

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Greg Smith 11/8/2009 Dr. Cuellar – Econ 317 Problem Set #6 a. Construct a variable to account for a non-linear relationship between wages and experience. Write out your new regression model and explain and interpret the variables. X4 = X1(^2) Wage = β0 + β1X1 + β2X2 + β3X3 + β4X4 + U. b. i. What are the expected signs of the coefficients? Experience = positive Female = negative Female Experience = negative Experience Squared = Negative (diminishing returns) ii. Write out the regression equation for men. Wage = β 0 + β 1 X 1 + β 4 X 4 + U. iii. Write out the regression equation for women. Wage = (β 0 + β 2 ) + (β 1 + β 3 )X 1 + β 4 X 4 + U. c. Using the data set Wage1.dta, estimate the above equation: . reg wage exper female femexp exper2 Source | SS df MS Number of obs = 526 -------------+------------------------------ F( 4, 521) = 34.31 Model | 1492.95648 4 373.239119 Prob > F = 0.0000 Residual | 5667.45781 521 10.878038 R-squared = 0.2085 -------------+------------------------------ Adj R-squared = 0.2024 Total | 7160.41429 525 13.6388844 Root MSE = 3.2982 ------------------------------------------------------------------------------ wage | Coef. Std. Err. t P>|t| [95% Conf. Interval]
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0 5 10 15 20 25 0 10 20 30 40 50 years potential experience average hourly earnings Fitted values Fitted values -------------+---------------------------------------------------------------- exper | .3101882 .039893 7.78 0.000 .2318173 .3885591 female | -1.421982 .4618985 -3.08 0.002 -2.329394 -.5145693 femexp | -.0572396 .0212425
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