Question

PLEASE SHOW ALL WORK & STEPS.

PART 1

This problem is inspired by a study of the ""gender gap"" in earnings in top corporate jobs [Bertrand and Hallock (2001)]. The study compares total compensation among top executives in a large set of U.S. public corporations in the 1990s. (Each year these publicly traded corporations must report total compensation levels for their top five executives.) Let Female be an indicator variable that is equal to 1 for females and 0 for males. A regression of the logarithm of earnings onto Female yields ln(Earnings) = 6.55 -0.41Female, SER = 2.44. The Standard Errors for the Constant is (0.01) and for the Female variable is (0.05). The hourly earnings for top female executives is $______per hour. (Round your response to two decimal places.)

A. 67.89

       
B. 43.67

       
C. 464.05

       
D. 29.47

PART 2

You are studying the following regression on earnings of a CEO:   

Earnings)= 3.86 - 0.28Female + 0.37MarketValue + 0.004Return

You wonder whether any of the independant variables should be introduced in the model in a nonlinear fashion instead. Right now, they are all present in their original form. How would you test which variables must you test to see if a nonlinear version of them is better suited ?

       
A. Do a kdensity plot for each variable and make your decision

       
B. Do a nonlinearity test (nlcheck in Stata) for each variable. Then make a decision

       
C. Do a kdensity plot for each continuos variable, so leave the binary gender variable out. Then make your decision.

       
D. Do a nonlinearity test (nlcheck in Stata) for each variable, but the binary gender variable. and then do a kdensity plot for each continous (not dummy) variable.

PART 3

"A standard ""money demand"" function used by macroeconomists has the form ln(m) = Beta 0 + Beta 1 ln(GDP) + Beta 2 R, Where m is the quantity of (real) money, GDP is the value of (real) gross domestic product, and R is the value of the nominal nterest rate measured in percent per year. Supposed that Beta1 = 1.05 and Beta 2 = - 0.03. What is the expected change in m if GDP increases by 7%? Round to nearest integer

       
A. decrease by $9

       
B. increase by $23

       
C. increase by 11%

       
D. increase by 7%

Answer 1

As per HomeworkLib guidelines first question is answered

Kindly ask rest of the questions in a separate post

1.

Ln(Earnings) = 6.55 - 0.41(Female)

In order to find hourly earnings of top female executives, we take the value of 1 for the variable Female

This makes,

Ln(earnings) = 6.55-0.41(1)

Ln(earnings) = 6.14

Take antilog on both sides,

Earnings = antilog(6.14)

Earnings = 464.05357

Thus, correct option is (c) 464.05