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    Multiple regression analysis for wage data

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    6.28. Based on the Current Population Survey (CPS) of March 1995, Paul Rudd extracted a sample of 1289 workers, aged 18 to 65, and obtained the following information on each worker:

    Wage = hourly wage in $
    Age = age in years
    Female = 1 if female worker
    Nonwhite = 1 if a nonwhite worker
    Union = 1 if a union member
    Education = years of schooling
    Experience = potential labor market experience in years

    a. Based on these data, estimate the following model, obtaining the usual regression statistics.

    1n Wagei = B1 + B2 Age + B3 Female + B4 Nonwhite + B5 Union + B6 Education + B7 Experience + ui

    where 1n Wage = (natural logarithm of Wage)
    b. How do you interpret each regression coefficient?
    c. Which of these coefficients are statistically significant at the 5% level? Also obtain the p value of each estimated t
    d. Do union workers, on average, earn a higher hourly wage?
    e. Do female workers, on average, earn less than their male counterparts?
    f. Is the average hourly wage of female nonwhite workers lower than the average hourly wage of female white workers?
    How do you know? (Hint: interaction dummy.)
    g. Is the average hourly wage of female union workers higher than the average hourly wage of female non-union workers?
    How do you know?

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    Solution Summary

    Step by step method for regression model for wage data is given in the answer.