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Problem 2: Estimating compensation (15 points) A compensation expert at a large software firm is studying the impact of work experience and appropriate education on
Problem 2: Estimating compensation (15 points) A compensation expert at a large software firm is studying the impact of work experience and \"appropriate\" education on the salaries earned by the firm's junior level computer programmers. She estimates the following model: log(Salary) = a + b\\ Experience + boIT Degree + b;Experience*IT Degree where Salary 1s the programmer's annual salary in dollars, Experience 1s the programmer's experience in years, and /7" Degree 1s a dummy variable that is 1 if the programmer has a college degree in an IT-related field and 0 if not. (a) Provide a precise and concise economic interpretation for b;. Interpretation: An increase of 1 year in the programmer's experience is associated with an average percent change of 100(e*b1-1) % (or 100b1% if b1<.1 in the annual salary for programmers that do not have an it degree. state alternative hypothesis must be tested order to verify conjecture average starting of it-related degree holders is greater than those who college h b>0 (c) State the alternative hypothesis that must be tested in order to verify the conjecture that, on average, [T-related college degree holders enjoy higher annual pay-raises than those without an IT-related college degree. H: ;>0
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