Answer to Question #187938 in Economics for Ray

Question

From a local chamber of commerce records, information are gathered about the hourly wage and the number of years of experience from local workers. You are interested in exploring a possible relationship between workers’ hourly wages and the number of years of experience.

a. Write down a model (not an estimated equation) that implies percentage changes (or relative changes) to wages due to absolute (or level) changes to years of experience. Indicate which parameter measures the relative change in wages.

A random sample of 935 workers provided the following information summaries: 𝑌 = ln (𝑤𝑎𝑔𝑒) 𝑋 = 𝑒𝑥𝑝𝑒𝑟 ∑𝑌 = 6338.369 ∑𝑋 = 10812 ∑𝑌 ଶ = 43133.48 ∑𝑋 ଶ = 142900 ∑𝑋𝑌 = 73330.04 𝑛 = 935

b. Use the summarized data provided above to estimate the model: ln(𝑤𝑎𝑔𝑒) = 𝛽଴ + 𝛽ଵ𝑒𝑥𝑝𝑒𝑟 + 𝑢, where: wage is the hourly worker’s wage, and exper is the number of years of experience for a worker.

Answer 1

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