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Q-1: Consider the model for wage determination in labor market as examined by Ms. Shaiza: I(WAGE)= B + BEDUC + B.EDUC? +B.EXPER+ B. EXPER+B.(EDUC X
Q-1: Consider the model for wage determination in labor market as examined by Ms. Shaiza: I(WAGE)= B + BEDUC + B.EDUC? +B.EXPER+ B. EXPER+B.(EDUC X EXPER)+B, HRSWK +e Where the explanatory variables are years of education, years of experience and hours worked per week. Estimation results for this equation, and for modified versions of it obtained by dropping some of the variables, are displayed in given Table. These results are from the 1000 observations. Wage is earning per hour in dollars. a) What restrictions on the coefficients of Eqn (A) give Eqn (C)? Use an F-test to test these restrictions. What question would you be trying to answer by performing this test? b) Estimate and interpret the marginal effect of education on wage for Mr. Munim who has 12 years of education and 10 years of experience. (using Egn. A). (5+5) Wage Equation Estimates Variable Coefficient Estimates and (Standard Errors) Egn (A) En (B) Eqn (C) Eqn (D) Eqn (E) 1.055 1.252 1.573 1917 0.904 (0.266) (0.190) (0.188) (0.080) (0,0%) EDUC 0.0498 0.0289 0.0366 0.1006 (0.0397) (0.0344) (0.0350) (0.0063) EDUC 0.00319 0.00352 0.00293 (0.00169) (0.00166) (0.00170) EXPER 0.0373 0.0303 0.0279 0.0295 (0.0081) (0.0048) (0.0054) (0.0048) EXPER -0.000485 -0.000456 -0.000470 -0.000440 (0.000090) (0.000086) (0.000096) (0.000086) EXPER EDUC -0.000510 (0.000482) HRSWK 0.01145 0.01156 0.01345 0.01524 0.01188 (0.00137) (0.00137) (0.00136) (0.00151) (0.00136) 2224166 222.6674 233.8317 280,5061 223.6716 SSE
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