Question Get Answer

Hi, I'm stuck on the following lobor economics question, and don't

know what regressions I should use to answer it:

Suppose you obtain data on a sample of working adult individuals in the U.S. (indexed by i = 1, ..., N ), who self-reported the following variables:

• labinci = annual wage and salary income from labor (after taxes)• nonlabinci = annual non-labor income (after taxes)
• hoursi = annual hours worked
• educi = total years of completed schooling
• agei = age in years
• malei = a dummy variable equal to 1 for males, 0 for females

 Using these data, how would you estimate the wage elasticity of labor supply? Write down a specific regression, and feel free to define any new variables using the ones you already have, if you think they would be relevant. Make sure to mention what your coefficient of interest is.

How would you test each of the following three hypotheses:
A) the substitution effect dominates the income effect.
B) leisure is a normal good.
C) all else equal, men work significantly more hours than women.

Write down specific null (H0) and alternative (H1) hypotheses using parameters from the regression equation you wrote down above.

 Suppose you estimate an elasticity of −0.2. How would you interpret this?

Suppose you are particularly worried about people misreporting their an- nual work hours. Do you think the true labor supply elasticity would be larger or smaller than −0.2?

Besides measurement error, what other potential concerns do you have about this regression approach (e.g. with respect to the key OLS assumptions being potentially violated)? Which slope coefficients do you think may be biased? Explain.

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Let our 24/7 Econometrics tutors help you get unstuck! Ask your first question.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes