2) You would like to find the effect of gender and marital status on earnings. A

Question

2) You would like to find the effect of gender and marital status on earnings. As a result, you consider running the following regression:

ahei= 0 + 1×DFemmei + 2×DMarri + 3×DSinglei + ui

Where ahe is average hourly earnings, DFemme is a binary variable which takes on the value of "1" if the individual is a female and is "0" otherwise, DMarr is a binary variable which takes on the value of "1" if the individual is married and is "0" otherwise, DSingle takes on the value of "1" if the individual is not married and is "0" otherwise. The regression program which you are using returns a message that the equation cannot be estimated. Why do you think that is? What should you do?

Explanation / Answer

Problem: All IV should not be categorical, you need continuous variables which moderately correlate with DV.

bootstrapped linear regression could be used in this case. linear regression with bootstrap validation. Bootstrap validation is when 500 (you can set this number) new datasets are created with same sample size as your original dataset. This sample comes from our dataset with replacement.

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