. Suppose that a researcher, using wage data on 250 randomly selected male worke
ID: 1101687 • Letter: #
Question
. Suppose that a researcher, using wage data on 250 randomly selected male workers and 280 female workers, estimates the following OLS regression: Wage = 12.52 + 2.12Male, R2 = 0.06, SER=4.2 (0.23) (0.36) Where Wage is measured in dollars per hour and Male is a binary variable that is equal to 1 if the person is a male and 0 if the person is a female. Define the wage gender gap as the difference in mean earnings between men and women. a) What is the estimated gender gap? (2 marks) b) Is the estimated gender gap significantly different from zero? (2 marks) c) Construct a 95% confidence interval for the gender gap (2 marks) d) In the sample, what is the mean wage of women? Of men? (2 marks) e) Another researcher uses these same data but regresses Wages on Female, a variable that is equal to 1 if the person is a female and 0 if the person is a male. What are the regression estimates calculated from this regression (2 marks) Wage = ? + ? Female, R2 = ?, SER=?
Explanation / Answer
a) Mean wage earning Men = 12.52 + 2.12 = 14.64 ;
Mean Wage earning women = 12.52 ;;
gender gap = 14.64 - 12.52 = 2.12
b) compute t = gender gap / ser = 2.12 / 4.2 = 0.50
at 95 % level of significance , t value = 1.6 ; since t critical 1.6 > t cmputed 0.50 ;
mean is not significantly different form zero
c) CI = [2.12 + - 1.6*0.5] = [1.32,2.92]
d) Mean wage of women = 12.52
e) new equation will be : Wage = 14.64 -2.12*female
R^2 will be same
SER will be same
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