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You are interested in looking at the returns to experience (how much wages go up for...

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Basic Math

You are interested in looking at the returns to experience (howmuch wages go up for each additional year a person works). Thereare several possible models you can run. Answer the questionsrelated to the following models. Please note these values are notcalculated from actual data.

wagei=10+6.2*experiancei+10*health+yXi+Ei

health is an indicator if an individual works in the healthcareindustry. It is one if the person works in healthcare and zero ifthey work in a different industry.

a. How much would you expect your wage to go up by if you had anadditional year of experience and worked in the health sector?

b. How much would you expect your wage to go up by if you had anadditional year of experience and worked in an industry that wasnot health related?

c. How much would you expect your wage to go up by if you had anadditional four years of experience and worked in the healthsector?

d. In the output of the regression STATA indicates the p valuefor health is 0.03. At a 5% significance level does working in thehealthcare industry have an impact on wages?

Answer & Explanation Solved by verified expert
4.4 Ratings (739 Votes)
Givenwagei 10 62 exp 10health yXi Ei 1aIf we have extra year of experience and belongs to healthsector health 1newwage 10 62 exp 1 10 1 yXi Einewwage 10 62 exp 62 10 yXi Ei 2Substracting 1 from 2 we getnewwage wage 162 10 healthNow the individual belongs to health sector so health 1 So equation becomesnewwage 62 wageHence new wage will increase by 62 units as    See Answer
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