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Problem 3 Problem Set 2

# Problem 3 Problem Set 2 - w2 reg e1w1r1 Then we see that...

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In order to run a regression on the effort of type 1 workers with the wage of type 1 workers, we need to use the command reg e1w1 . We receive a standard error output of .0316538 . After running another regression ( reg e2w2 ) between the effort of worker 2 with the wage of worker 2, we receive a standard error output of .0261249 . Then in order to test the hypothesis that the coefficient on own wage equals the coefficient on relative wage we must run the regression between the effort and wage of worker 1 with the relative wage (w1 –
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Unformatted text preview: w2): reg e1w1r1 . Then we see that the coefficient of the relative wage is .7373911 . Then in order to test the hypothesis we use the command: testw1 - .7373911 . From this result we see that this is a very unlikely probability with a probability of 0% and an F distribution (1,1107) = 2521.11. Therefore, it is very unlikely the coefficient of ones own wage will equal the coefficient of the relative wage....
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