Use data file cps 5 for this exercise.

a. Estimate the following wage equation by OLS and use heteroskedasticity robust standard errors:

Discuss the results.

b. Add MARRIED to the equation and reestimate. Holding education and experience constant, do white male married workers in the northeast get higher wages? Using a 5\% significance level, test a null hypothesis that wages of married workers are less than or equal to those of unmarried workers against the alternative that wages of married workers are higher.

c. Examine the residuals from part (a) for the two values of MARRIED. Is there evidence of heteroskedasticity?

d. Estimate the model in part (a) twice—once using observations on only married workers and once using observations on only unmarried workers. Use the Goldfeld-Quandt test and a 5\% significance level to test whether the error variances for married and unmarried workers are different.

e. Hypothesize that \(\sigma_{i}^{2}=\sigma^{2} \exp \left(\alpha_{2}\right.\) MARRIED \()\). Find generalized least squares of the model in part (a). Compare the estimates and standard errors with those obtained in part (a).

f. Find two \(95 \%\) interval estimates for the marginal effect \(\partial E(\ln (W A G E)) / \partial E D U C\) for a white male worker living in the northeast with 16 years of education and 10 years of experience. Use the results from part (a) for one interval and the results from part (e) for the other interval. Comment on any differences.

Transcribed Image Text:

In(WAGE) = B + BEDUC + BEXPER + EXPER + (EXPER EDUC) +B6FEMALE + B,BLACK+8,SOUTH+8MIDWEST + 83 WEST + e (XR8.22)