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You are investigating the earnings functions. Using the data of 1,744 individuals, your regression model results show as follows (t-ratios are given in parenthesis under
You are investigating the earnings functions. Using the data of 1,744 individuals, your regression model results show as follows (t-ratios are given in parenthesis under each coefficient): In (Earn,) = 8.50 + 0.03 x Age; (5.01) (1.10) where Earn is weekly earnings in GBE, and Age is in years.You decide to allow the regression line to differ for the below and above 40 years age category. Accordingly you create a dummy variable, Dage, that takes the value of one for age 39 and below, and is zero otherwise. The earnings equation result is provided in the following (t-ratios are given in the parenthesis under each coefficient): In (Earn,) = 6.92 - 3.13 x Dage; - 0.019 x Age; + 0.085 x (Dage; X Age;) (0.01) (-3.22) (-4.45) (20.01) (c) Using two separate equations, write the estimated regression model: one for the age category 39 years and under, and one for 40 and above. Briefly comment on your findings on the two equations
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