The first seven exercises refer to the table of estimated regressions below, com

Question

The first seven exercises refer to the table of estimated regressions below, com- puted using data for 1998 from the CPS. The data set consists of information on 4,000 full-time full-year workers. The highest educational achievement for Results of Regressions of Average Hourly Earnings on Gender and Education Binary Variables and other characteristics using 1998 data from the Current Population Survey Dependent variable: Average Hourly Earnings (AHE) Regressor College (X) 5.46 (0.21) -2.64 (0.20) 5.48 (0.21) -2.62 (0.20) 0.29 (0.04) 5.44 (0.21) -2.62 (0.20) 0.29 (0.04) 0.69 (0.30) 0.60 (0.28) -0.27 (0.26) 3.75 Female (%) Age (X) Northeast (X) Midwest (X3) South (X 12.69 (0.14) Intercep 4.40 Summary Statistics and Joint Tests F-Statistic for regional effects0 SER 6.10 6.21 0.194 6.27 6.22 0.176 0,190 4000.0 4000.0 4000.0

Explanation / Answer

Part-a

Test statistic for age t=coefficient/standard error=0.29/0.04=7.25

Degree of freedom =n-k-1=4000-6-1=3993

Critical t at 5% level and 3993 df=1.96

As calculated t>1.96, we reject the null hypothesis and conclude that age is important determinant of earning

Part-b

Sally expected earning = 4.40+0.29*29-2.62*1+5.48*1=15.67

Besty expected earning = 4.40+0.29*34-2.62*1+5.48*1=17.12

95% confidence interval =(15.67-17.12)±1.96*sqrt(6.22/(3993))=( -1.527357354 -1.372642646)

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