Q#1 (4 Points) Below is an estimated regression model with dummy variables only

Question

Q#1 (4 Points) Below is an estimated regression model with dummy variables only (ANOVA). Y 12.45+1.55D,+1.05D+1.10D D:+ .05x Where, Y hourly wage (S) D- 1, if Male and D-0, if Female D.- 1, if White and D-0, if Non-White X-Number of years of schooling Answer the following: a. For X-12, how much would be the hourly wage for a Non-White Female worker? b. How much is the average hourly wage of a White Male worker with 12 years of schooling? How much is the average hourly wage of a White Female worker with 12 years of schooling? c. d. How much is the average hourly wage of a Non-White Male worker with 12 years of schooli

Explanation / Answer

Consider the given problem, here the we have a given model as follows

Y=12.45 + 1.55*D1 + 1.05*D2 + 1.10*D1D2 + 0.05*X, “D1 shows presence of Male” and “D2 shows presence of White”.

a)

For X=12, hourly wage for “Non-white Female” worker is given by,

Y=12.45 + 1.55*(0) + 1.05*(0) + 1.10*(0) + 0.05*12.

=> Y=12.45 + 0.05*12 = 13.05, => Y=13.05.

b)

For X=12, hourly wage for “White Male” worker is given by,

Y=12.45 + 1.55*1 + 1.05*1 + 1.10*1 + 0.05*12.

=> Y=12.45 + 1.55 + 1.05 + 1.10 + 0.6, => Y = 16.75.

c).

For X=12, hourly wage for “White Female” worker is given by,

Y=12.45 + 1.55*(0) + 1.05*1 + 1.10*(0) + 0.05*12.

=> Y=12.45 + 1.05 + 0.6, => Y =14.1.

d).

For X=12, hourly wage for “Non-white Male” worker is given by,

Y=12.45 + 1.55*1 + 1.05*(0) + 1.10*(0) + 0.05*12.

=> Y=12.45 + 1.55 + 0.6, => Y = 14.6.

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