Assignment 1 (SPSS) Aziz Ali 2021-02-03

The dataset for this exercise (males.xlsx) contains data for young working males in the USA with some professional and personal characteristics. Please only use data for the year 1987. We want to explain the log wages from the other variables using the following model: logwagei = 1 + 2school + 3experi + 4unioni + 5mari + 6blacki + 7hispi + i We assume that all i and all explanatory variables are independent and that i are independently distributed with expectation 0 and variance 2 . a. Compare summary statistics of all the variables in the model and provide a brief interpretation. b. Estimate the parameters by OLS. Report and interprete the estimation results, including the R2 . Pay attention to economic interpretation as well as statistical significance. c. Test on the basis of the results in b, test the null hypothesis that being a union member, ceteris paribus, affects a persons expected wage by 5%. Also, test the joint hypothesis that race does not affect wages. In each case formulate the null and alternative hypotheses and present the test statistic. d. Consider a more general model that includes exper2 i . Compare this model with the model given above using R2 , adjusted R2 and t-test. What is your conclusion? e. Save the OLS residuals from the original model. Run a regression where you try to explain the residuals from the explanatory variables in the original regression. What do you find? Explain. f. Extend the model to investigate whether black union members benefit more from union membership than non-black union members. Estimate the extended model and test the hypothesis g. Make plots that can be used to investigate heteroskedasticity.