IL (I1 pts) You are given th ollowing economie model: In(ahe) = ) + Redu + .age
ID: 3325497 • Letter: I
Question
IL (I1 pts) You are given th ollowing economie model: In(ahe) = ) + Redu + .age + 3female + ,edu.female + ,age.female + (age With all the variables described as follows: ln(ahe) = natural log of average hourly earnings; age worker's age; female is a dummy variable equal to l if the worker is a female, and 0 if male; age female is an interaction variable equal to age female; edu = the worker's number of years of education; edu female is an interaction variable equal to edu female; age age "age From the model above, answer the following questions: What is the return to education for a female worker? For a male worker? (2pts) a. b. What is the effect of getting one year older on the hourly wage of a female worker? On the hourly wage of a male worker? (2pts) From the model above, what is the variable that allows the effect of a worker's age to depend on the gender? What is its parameter? What sign do you expect for that parameter if getting one year older is more valuable for women than men? (2pts) c.Explanation / Answer
The regression equation is given as below
ln(ahe) = B0 + B1*edu + B2*age + B3*female + B4*edu*female + B5*age*female + B6*age^2
(a) The return to education for a female worker is the is coefficient B4 which s the slope for the factor edu*female with relation to ln(ahe), it is the same for males as well except that the female variable will be 0 in this case
(b) So effect of getting one year older on the hourly earnings that ahe = e ^ (B2 + B6) so depeneding the on the values of B2 and B6 ahe eill either increase or decrease exponentially
(c) The variable that allows the effect of a workers age to depend on the gender is age.female. Ite parameter is B5. Its sign will be positive if getting one year older is mrevaluable for women than men as then ahe will increase exponentially
(d) For workers of the same age and education the percentage earning gap between male and female will depend on the gender as there are 3 units to the equation that depend on gender