Based on the survey in lecture, for people who are working and therefore report their wage and hours of working, we estimate the following labour supply regression: log(hi) = -1.457 log(wi) - 0.042 malei + 0.198 cari - 0.022 studyi,

(0.595) (0.200) (0.196) (0.011)

where hi is hours of work per week, wi is hourly wage rate, malei ids an indicator for males, cari is an indicator for car ownership, and studyi is hours of study per week.

a) Calculate the t-statistics for each estimate. Which estimates are statistically significant at the 5% level? What is the labour supply elasticity? Is the labour supply curve implied by the above regression downward sloping or upward sloping?

b) Do you think the true labour supply curve downward sloping or upward sloping? Do you think the true labour supply elasticity positive or negative? Use the idea of counterfactual to discuss the endogeneity problem of the above regression.

3. Based on the survey in lecture, for people who are working and therefore report their wage and hours of working, we estimate the following labour supply regression: log(h.-) = -1.457 log(w.-) 0.042 male.- + 0.198 car; 0.022 studyi, (0.595) (0.200) (0.196) (0.011) where h.- is hours of work per week, w; is hourly wage rate, malei ids an indicator for males, cam is an indicator for car ownership, and study.- is hours of study per week. a) Calculate the tstatistics for each estimate. Which estimates are statistically signicant at the 5% level? What is the labour supply elasticity? Is the labour supply curve implied by the above regression downward sloping or upward sloping? b) Do you think the true labour supply curve downward sloping or upward sloping? Do you think the true labour supply elasticity positive or negative? Use the idea of counterfactual to discuss the endogeneity problem of the above regression. 0) Briey describe the research design in Fehr & Goette (2007) and explain how the research design can solve the endogeneity problem in (b)