We run a regression to test whether higher working experience leads to higher ho

Question

We run a regression to test whether higher working experience leads to higher hourly wages, and include three explanatory variables age, education squared, and log of experience. We obtain the following fitted regression line.

How to interpret the coefficient of age?

percent

When age increases 1 unit, wage increases 0.56 unit

When age increases 1 unit, wage increases 0.56 percent

percent

percent

When age increases 1 unit, wage increases 0.56 unit

When age increases 1 unit, wage increases 0.56 percent

percent

Explanation / Answer

B. When age increases 1 unit , wage increases 0.56 units

As per equation wage depends on age and education. Coefficient of age is 0.56 and education is 1.41. And both are directly related to wage.

Increase in age by 1 unit leads to increase in wage by 0.56 units.

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