II. (11 pts) You are given the following economic model: m(ahe) = B) + Bedu + .a
ID: 3325528 • Letter: I
Question
II. (11 pts) You are given the following economic model: m(ahe) = B) + Bedu + .age + 3female + ,edu.female + .age.female + 6age" With all the variables described as follows In(ahe)natural log of average hourly earnings; age worker's age; female is a dummy variable equal to 1 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 2 ageage. From the model above, answer the following questions: What is the return to education for a female worker? For a male worker? (2pts) b. a. 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) c. 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)Explanation / Answer
Now ln(ahe) = B0 +B1*edu * + B2 age + B3*female + B4*edu*female + B5*age*female + B6*age^2
(a) the relationship of return to education of female worker is the parameter B4. For every unit increase in B4 the return will either increase or decrease exponentially.For a male worker it will be 0 as males are represented by 0
(b) The effect of getting one year older on the hourle wage of a female worker will depend on B2, B5 and B6, and earnings will increase or decrease exponentially with every unit increase or decrese in these variables.For a male worker it will be dependent on B2 and By as males are represented by 0
(c) Variable that allows a workers age to depend on gender is age.female. Its parameter is B5. If getting one year older is more valuable for women then thesign I expect for this variable is positive as then earnings will increase exponentially, for increase in the this variable
(d) For workers of the same age and education, percentage earning gap will depend on B3, B4 and B5 as they are the parameters which involves the gender variables in them