The data set consists of information on

4600

full-time full-year workers. The highest educational achievement for each worker was either a high school diploma or a bachelor's degree. The worker's ages ranged from 25 to 45 years. The data set also contained information on the region of the country where the person lived, marital status, and number of children. For the purposes of these exercises, let

AHE = average hourly earnings (in 2005 dollars)

College = binary variable (1 if college, 0 if high school)

Female = binary variable (1 if female, 0 if male)

Age = age (in years)

Ntheast = binary variable (1 if Region = Northeast, 0 otherwise)

Midwest = binary variable (1 if Region = Midwest, 0 otherwise)

South = binary variable (1 if Region = South, 0 otherwise)

West = binary variable (1 if Region = West, 0 otherwise)

Results of Regressions of Average Hourly Earnings on Gender and Education Binary Variables and Other Characteristics Using Data from the Current Population Survey
Dependent variable: average hourly earnings (AHE).
Regressor	(1)	(2)	(3)
College (X1)	5.95	5.97	5.93
Female (X2)	2.88	2.86	2.86
Age (X3)		0.32	0.32
Northeast (X4)			0.75
Midwest (X5)			0.65
South (X6)			0.29
Intercept	13.83	4.80	4.09
Summary Statistics
SER	6.83	6.78	6.77
R2	0.192	0.207	0.211
R2	0.192	0.206	0.210
n	4600	4600	4600

Using the regression results in column (3):Workers in the Northeast earn

$enter your response here

more per hour than workers in the West, on average, controlling for other variables in the regression.

(Round

your response to two decimal

places.)

Workers in the South earn

$enter your response here

less per hour than workers in the West, on average, controlling for other variables in the regression.

(Round

your response to two decimal

places.)

Do there appear to be important regional differences?

A.

No, because workers in the Midwest earn more per hour than workers in the Northeast, while workers in the South earn less per hour than workers in the West.

B.

No, because the difference in wages is minimal.

C.

Yes, because wages are not consistent across the region.

D.

Yes, because workers in the Northeast earn significantly more than workers in the South.

Why is the regressor West omitted from the regression? What would happen if it was included?

A.

The regressor West is omitted to make the OLS estimator linear. If West is included, then the intercept can no longer be written as a perfect linear function of the four regional regressors.

B.

The regressor West is omitted to avoid perfect multicollinearity. If West is included, then the OLS estimator cannot be computed in this situation.

C.

The regressor West is omitted to minimize the sum of squared residuals. If West is included, then the sum of squared residuals is no longer minimized.

D.

The regressor West is omitted to avoid the OLS estimator bias. If West is included, then the OLS estimator is biased.

Juanita is a

30-year-old

female college graduate from the South. Jennifer is a

30-year-old

female college graduate from the Midwest. Calculate the expected difference in earnings between Juanita and Jennifer.The expected difference in earnings between Juanita and Jennifer is

$. 10.10

per

hour.

(Round

your response to two decimal

places.)