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42 pts Labor economists have extensively researched the determinants of earnings. Investment in human capital, measured in years of eflucation, and on the job training

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42 pts Labor economists have extensively researched the determinants of earnings. Investment in human capital, measured in years of eflucation, and on the job training are some of the most important explanatory variables in this research. You decide to apply earnings functions to the field of sports economics by finding the determinants for baseball pitcher salaries. You collect data on 455 pitchers for the 1998 baseball season and estimate the following equation using OLS and heteroskedasticity-robust standard errors: where Earn is annual salary in dollars, Years is number of years in the major leagues, south is a dummy variable (=1 if the person comes from South of US and =0 if the person comes from North of US), and the reason to include the dummy variable is someone told you that people from South tends to earn more than people from north. Innings is number of innings pitched during the career before the 1998 season, Saves is number of saves during the career before the 1998 season. In(earn) = 12.45 + 0.052 . Years + 0.0007 . south . Years + 0.00089 Innings + 0.0032Sa (0.08) (0.026) (0.00005) (0.00020) R2 = 0.45, SER = 0.874 (a) [5 pts] What happens to earnings when the pitcher stays in the league for one additional year, and the pitcher comes from North? (b) [6 pts] Compare the salaries of two relievers, one with 10 more saves than the other. What effect does pitching 100 more innings have on the salary of the pitcher? (c) [3 pts] Do the signs correspond to your expectations? Explain. (d) [7 pts] Are the individual coefficients statistically significant? (Please use the 5% significance level and a two-sided test)

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