Consider the following regression estimates . reg wage educ exper exper2 tenure,
ID: 1154756 • Letter: C
Question
Consider the following regression estimates . reg wage educ exper exper2 tenure, robust Number of obs F(4, 521) Prob > F R-squared Root MSE 526 38.61 0.0000 0.3428 3.0053 Linear regression Robust wage Coef Std. Err. p>It! [95% Conf. Interval] 556474 2051875 exper20042821 0807841 1614708 6718278 2680842 -.082819 2169666 cons3.419867 .78041274.38 .08 -4.953009 1.886725 4411202 1422109 -. 0055853 105975 0587184 0320162 educ 9.48 e,000 6.41 0.000 5.97 0.000 5.72 0.000 exper tenur 0282489 where wage - hourly wage in USS, educ -years of education, exper -years of work experience, exper2-experience squared (exper * exper), and tenure- number of years at the same employer 5. According to the estimated coefficients of exper and exper2, what is the functional form of the relationship between experience and wage when we hold educ and tenure constant? Explain. [4 marks] 6. What is the marginal effect on predicted wage of increasing experience at 0 years of experience [1 mark] 8 years of experience [1 mark] 24 years of experience [1 mark] a. b. c. 7. At how many years is the estimated marginal effect of experience on wage zero? [3 marks]Explanation / Answer
5. The functional form,
W = -3.419867+0.2051075*exper-0.0042021*exper^2, keeping education and tenure variables constant the values become zero
6.
a. by replacing 0 value in the above equation we get W = -3.4
b. by replacing 8 value in the above equation for experience we get W = -1.8
marginal effect =(-3.4-(-1.8))/8 = -0.2
c. =(-3.4-(-1))/12 = -0.2
7.
W = -3.419867+0.2051075*17-0.0042021*17=0
17 years