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Unformatted text preview: Professor Mumford Econ 360  Fall 2010 mumford@purdue.edu Problem Set 7 Due at the beginning of class on Tuesday, October 26 Multiple Choice Questions (12 points) The following model allows the return to education to depend upon the total amount of both parents education, pareduc : log ( wage ) = + 1 educ + 2 educ pareduc + 3 exper + 4 tenure + u. (1) Next, consider altering model (1) above by adding the variable pareduc by itself to the model: log ( wage ) = + 1 educ + 2 educ pareduc + 3 exper + 4 tenure + 5 pareduc + u. (2) 1. (4 points) What is the return to an additional year of education in model (1)? (a) + 1 educ + 2 educ pareduc + 3 exper + 4 tenure (b) 1 + 2 2 pareduc (c) 1 + 2 pareduc (d) 1 2. (4 points) In model (1), what does 2 > 0 imply? (a) The return to education for an individual is greater for those whose parents have more education. (b) The return to education for an individual is greater for those whose parents have less education. (c) On average, individuals whose parents have more education gain more education than individuals whose parents have less education. (d) On average, individuals whose parents have more education gain less education than individuals whose parents have less education. 3. (4 points) What is the return to an additional year of parent education in model (2)? (a) + 1 educ + 2 educ pareduc + 3 exper + 4 tenure + 5 pareduc (b) 5 + 2 educ (c) 1 + 2 pareduc (d) 5 1 Long Answer Questions (88 points) 4. (12 points) Suppose we want to estimate the effects of alcohol consumption, alcohol , on college grade point average, colGPA . In addition to collecting information on grade....
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 Spring '10
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