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A research team wants to know how much does education affect wage rates. The team collected...

A research team wants to know how much does education affect wage rates. The team collected 1000 observations on hourly wage rates, education and other variables from the 2008 Current Population Survey. Wage is measured in earnings per hour (WAGE) and education (EDUC) denotes years of schooling. The following equation is estimated by least squares. The estimates and standard errors are WAGE= 6.08(1.02) + 0.07EDUC^2(0.005)

(a) Sketch the estimated regression line for ???? = 0 to 20 years (in 5-yearly intervals).

(b) Predict the wage of a person with 10 years of schooling.

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Answer #1

A) sketch of regression eqn

(20, 34.08) Wage (0, 6.08) 10 Edu 20

B) with EDU = 10

Wage = 6.08 + .07*(10)2

= 6.08 + .07*100

= 6.08 + 7

= 13.08

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