1. Mincer equation. In Lecture Note 7c, we derived the Mincer equation relating In earnings to schooling, experience and experience squared. Specifically: In y = In E(0) + ps + [pk(0)]x - pk(0) 2n x 2 , where k(0) is the fraction of time spent investing in human capital immediately upon leaving school. This equation is derived by assuming that the fraction of time spent investing in human capital for a worker with x years of experience is k(x) = k(0) - -x. Assume that a worker has a 50-year time horizon (n = 50), p = 0.1, and k (0) = 0.3. a) What is the difference in In earnings between a worker with 10 years of experience and a worker with 0 years of experience? b) At what level of experience are earnings maximized? c) Now assume that improvements in medical technology extend the worker's time horizon to n = 55. Intuitively, do you think that k(0) will increase, decrease, or stay the same? d) Assume k(0) rises to 0.33. What happens to the difference in In earnings between a worker with 10 years of experience and a worker with 0 years of experience? At what level of experience are earnings maximized? What is the intuition for these results? e) A labor economist collected data from the March CPS between 2001 and 2007 and estimated the following Mincer equations: Men: In y = Bom + 0.11 educ + 0.0333 exp -0.00056 exp~ + Vm'X Women: Iny = Bof + 0.128 educ + 0.0129 exp -0.00007 exp2 +y,'X What are the implied values of p, k (0) and n for men and women? Do these accord with your intuition