How much does education affect wage rates

Reference no: EM13926044

Background:

In your role as an economic analyst you have been asked the following question:

• How much does education affect wage rates?

The Excel data file (wage) contains 100 observations for each of the following variables:

Variable	Label
wage	Earning per hour
In_wage	The log of earning per hour
educ	Years of education
educ2	Years of education squared

Instructions:

Conduct a simple linear regression analysis to examine the relationship between 'education' (the independent variable) and 'wage' (the dependent variable). Using the Excel data file, prepare a 2000 word report using the following structure:

• Purpose
• Background
• Method
• Results
• Discussion
• Recommendations

In preparing your report you must address the following questions:

(a) Obtain summary statistics and histograms for the variables WAGE and EDUC. Discuss the data characteristics.

(b) Estimate the linear regression WAGE: β₁ + β₂EDUC + ε and interpret the slope.

(d) Estimate the quadratic regression WAGE = α₁ + α₂EDUC² + ε and interpret the results. Estimate the marginal effect of another year of education on wage for a person with 12 years of education, and for a person with 14 years of education. Compare these values to the estimated marginal effect of education from the linear regression in part (b).

(e) Construct a histogram of ln(WAGE). Compare the shape of this histogram to that for WAGE from part (a). Which appears to be more symmetric and bell-shaped?

(f) Estimate the log-linear regression ln(WAGE) = γ₁ + γ₂EDUC + ε and interpret the slope. Estimate the marginal effect of another year of education on wage for a person with 12 years of education, and for a person with 14 years of education. Compare these values to the estimated marginal effects of education from the linear regression i n part (b) and quadratic in part (d).

Attachment:- wage.xlsx

Reference no: EM13926044

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