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Suppose you are interested in predicting wages based on various features of the individuals in the excel file Wage.xls The definition of the variables of interest is presented in the table below: Variable Definition / Unit Inwage Natural logarithm of wages education Number of years of education exper Years of experience gender Gender of the individual union Union job The individual's race Consider the following model: race 1. Formulate a multiple linear regression model that includes all potential explanatory variables and estimate it with the given sample data. Hint: Note the presence of qualitative variables that need to be re-coded as dummy variables. (3 marks) 2. Interpret the parameters estimated in the regression equation (6 marks) 3. What are the predicting variables actually affecting individuals' wages? Hint: Conduct proper hypothesis testing. (6 marks) 4. How well does the estimated regression equation fit the data? Hint: Explain the R- squared (1 mark) 5. If you desire to test the following hypothesis: HO: B1+B2=1 a. Write down the equation for the restricted model (in an abstract way). (2 marks) b. Test the hypothesis stated and explain how to get the critical value using excel functions. (2 marks) Suppose you are interested in predicting wages based on various features of the individuals in the excel file Wage.xls The definition of the variables of interest is presented in the table below: Variable Definition / Unit Inwage Natural logarithm of wages education Number of years of education exper Years of experience gender Gender of the individual union Union job The individual's race Consider the following model: race 1. Formulate a multiple linear regression model that includes all potential explanatory variables and estimate it with the given sample data. Hint: Note the presence of qualitative variables that need to be re-coded as dummy variables. (3 marks) 2. Interpret the parameters estimated in the regression equation (6 marks) 3. What are the predicting variables actually affecting individuals' wages? Hint: Conduct proper hypothesis testing. (6 marks) 4. How well does the estimated regression equation fit the data? Hint: Explain the R- squared (1 mark) 5. If you desire to test the following hypothesis: HO: B1+B2=1 a. Write down the equation for the restricted model (in an abstract way). (2 marks) b. Test the hypothesis stated and explain how to get the critical value using excel functions. (2 marks)