QUESTION 3 Using a nationally representative sample, the following estimated rel

Question

QUESTION 3 Using a nationally representative sample, the following estimated relationship is obtained log(wage)-1.31 + ?.086educ, where wage is the individual's wage and educ is years of education. If it typically takes 12 years to earn a high school diploma and 16 years to earn a college degree, then what is the exact predicted percentage difference between earnings of college graduates versus individuals who stopped their education upon earning a high school diploma? (Number please, for this problem no % sign or words.)

Explanation / Answer

for high school diploam, the educ=12 and log(wage)=1.31+0.086*12=2.342

for college degree, the educ=16 and  log(wage)=1.31+0.086*16=2.686

required % difference=exp(2.686)-exp(2.342)=14.67-10.40=4.67

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