In examining the determinants of income, data were collected regarding the chara
ID: 3063417 • Letter: I
Question
In examining the determinants of income, data were collected regarding the characteristics of 45 adults, and the regression INCOME= 1 + 2S + 3D +4 (S*D )+ u was used, where Y is the annual income (in thousands of dollars), S is his/her years of schooling, and D is a dummy variable = 1 if the adult is female. If you get = 26.3 + 2.98S - 0.76D + 0.31(S D) when you run the regression, which of the following is true?
A. The additional effect of an extra year of schooling is $340 higher for women than for men on average.
B. None of these answers are correct.
C. The marginal effect of an extra year of schooling is $310 higher for women than for men on average.
D. For each additional year of schooling, women earn $1,100 less than men on average.
Explanation / Answer
Option C is Correct
The marginal effect of an extra year of schooling is $310 higher for women than for men on average.