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Labor income is a function of the year of schooling andfollowing econometric model estimated: YM = 10.5 + lnSM YF = 9.4 + 0.7lnSF where

Labor income is a function of the year of schooling andfollowing econometric model estimated:

YM = 10.5 + lnSM

YF = 9.4 + 0.7lnSF

where ln is the natural log, Y is income, S is the average yearof the schoolings, and subscripts, M and F are Male and Femalerespectively.

a. What is the coefficient of SM? And explainthe economic meaning of the coefficient of SM.

b. Assume that the average years of schoolingis 10 years for both men and women. With the giveninformation, analyze if there is any discrimination between men andwomen. Graphically show the two equations and indicate theportion of discrimination.

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