A researcher wishes to examine the relationship between wageearned and educational level of workers. For a sample of 4000workers she has data on hourly earnings (measured in Dollar), ageof the worker (in years), worker’s gender, years of experience,number of years with the present employer, size of the firm inwhich the worker is employed, and highest educational qualification(with 4 classifications: no qualification, secondary schoolcertificate, bachelor degree or PhD)
- Explain how you would set up a model to address theresearcher’s key interest.
- Based on your model, how would you estimate the predictedimpact on wages of holding a PhD compared to having a bachelor’sdegree.
- If the researcher uses ln(wage) as the dependent variable, howwould the estimated coefficients be interpreted?
- What general advice would you give the researcher in relationto her work – eg. what econometric issues should she be aware of inconducting this research and interpreting the results?
