2024 – Use the data in CPS78 85 RAW for this exercise i How do you interpret the coefficient on y85 in equation 13 2

Use the data in CPS78_85.RAW for this exercise.

(i) How do you interpret the coefficient on y85 in equation (13.2)? Does it have an interesting interpretation? (Be careful here; you must account for the interaction terms y85_educ and y85_female.)

(ii) Holding other factors fixed, what is the estimated percent increase in nominal wage for a male with twelve years of education? Propose a regression to obtain a confidence interval for this estimate.

(iii) Estimate equation (13.2) but let all wages be measured in 1978 dollars. In particular, define the real wage as rage _ wage for 1978 and as rage _ wage/1.65 for 1985. Now use log(rage) in place of log(wage) in estimating (13.2). Which coefficients differ from those in equation (13.2)?

(iv) Explain why the R-squared from your regression in part (iii) is not the same as in equation (13.2).  of squared residuals, from the two regressions are identical.) (v) Describe how union participation has changed from 1978 to 1985.

(vi) Starting with equation (13.2), test whether the union wage differential has changed over time. (This should be a simple t test.) (vii) Do your findings in parts (v) and (vi) conflict?