Consider the following economic model describing workers' earnings: ln() = + + + + . + . + With all the variables described as follows: ln(wage) = natural log of monthly earnings; educ = years of education; tenure = years with current employer; female = 1 if female and 0 if not; tenure 2 = tenure*tenure edu.female is an interaction variable equal to educ*female; ten.female is an interaction variable equal to tenure*female.

(16 pts) Consider the following two estimated models (1) and (2), with all the variables already described in Question I. ========================================= Dependent variable: ---------------------------- log(wage) (1) (2) ----------------------------------------- female -0.059 (0.174) tenure 0.059*** 0.051*** (0.007) (0.007) educ 0.085*** 0.085*** (0.008) (0.007) tenfemale -0.021*** (0.006) educfemale -0.011 (0.013) tenursq -0.001*** -0.001*** (0.0002) (0.0002) Constant 0.479*** 0.369*** (0.114) (0.091) ----------------------------------------- Observations 526 526 R2 0.418 0.329 ========================================= Note: *p<0.1; **p<0.05; ***p<0.01 a. From the estimated model (1), what is the estimated return to education for: i) a female worker; ii) a male worker? (2pts) b. Based on the estimated model (1) and with a 5% significance level, assess the statistical significance of the importance of the quadratic variable tenure 2 in explaining changes in workers' wages. (State clearly your null and alternative hypotheses, the statistics to be used, and your conclusion) (2 pts). c. Based on the estimated model (1), what is the estimated effect of an additional tenure year on the wage of: i) a female worker? ii) a male worker? (2pts) d. Using the estimated model (1), at how many years does an additional year of tenure actually lower the predicted log(wage) for: i) a female worker? ii) a male worker? (2 pts) e. From the estimated model (1), calculate the estimated effect of the 16th tenure year on the wage for: i) a female worker; ii) a male worker. (2pts). f. From the estimated model (1), provide an appropriate interpretation for each of the coefficients associated to the variables female, educ, and edu.female. (3pts) g. What is the estimated percentage wage difference between female and male workers? (1pt) h. Based on estimated models (1) and (2), and with a 5% significance level, test whether being female or male has a statistically significant impact on wages that workers receive (state clearly your null and alternative hypotheses, the statistics to be used, and your conclusion). (2 pts)