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4. (15 points) If a wage subsidy is created for low-income workers, some workers may respond to this incentive by working more hours, while others
4. (15 points) If a wage subsidy is created for low-income workers, some workers may respond to this incentive by working more hours, while others may respond to their now-higher incomes by working fewer hours and consuming more leisure. (In labor supply theory, the effect of a wage increase on labor supply is theoretically ambiguous, because the substitution effect and the income effect are working in opposite directions.) Suppose that before the wage subsidy is introduced, high school dropouts were working an average of 30 hours per week. After the wage subsidy is created, a sample of 120 high school dropouts finds an average of 32 hours worked per week, with a standard deviation of 10.2 hours. Test whether the subsidy has changed the average hours worked among high school dropouts, using a signicance level of a = 0.01. 4.1. What is the standard error of the sample mean? 4.2. What is the test statistic? 4.3. What is the critical value? 4.4. Should you reject the null hypothesis? 4.5. Use Stata, a calculator, or an online tool to find the p-value for this hypothesis test
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