Question

(7.1b-e) Suppose we are able to collect a random sample of data on economics majors at a large university. Further suppose that, for those entering the workforce, we observe their employment status and salary 5 years after graduation. Let SAL S salary for those employed, GPA grade point average on a 4.0 scale during their undergraduate program, with METRICS- 1 if student took econometrics, METRICS0 otherwise. Assuming β2 and β3 are positive, draw a sketch of E(SALGPA, METRICS) β2GPA-BMETRICS. a. b. Define a dummy variable FEMALE 1, if the student is a female: 0 otherwise. Modify the regression model to be SAL B1+B2GPA+ AMETRICS+°FEMALE+e. What is the expected salary of a male who has not taken econometrics? What is the expected salary of a female who has taken econometrics? Consider the regression model c. SAL-A. + β2G PA + β3METRICS + δ:FEMALE + δ2(FEMALEX METRICS) + e What is the expected salary of a male who has not taken econometrics? What is the expected salary of a female who has taken econometrics? (Please note that actual numeric values are not required. Simply modify the equation depending on the relevant indicator variables). d. For the equation given in part c, assume that 610 and o2 0. Sketch E(SAL GPA METRICS, FEMALE) versus GPA for (i) males not taking econometrics, (ii) makes taking econometrics, (iii) females not taking econometrics, and (iv) females taking econometrics.

Answer 1