Question

# The following multiple regression model uses wage, which is hourly earnings in dollars, as dependent variable,...

The following multiple regression model uses wage, which is hourly earnings in dollars, as dependent variable, IQ as in IQ test scores as independent variables to run a regression as follows. STATA commands and outputs are given on the STATA output page. Answer the following questions. (23 points)

wage= β01 IQ + u

1. According to the STATA output, what are the minimum and the maximum for education years (denoted as educ) in the sample? (4 points)
2. Write down the estimation result in an equation form based on the STATA output. Make sure to include all estimated coefficients, number of observations and R-squared. (8 points)
3. What does the value of R-squared mean? (3 points)
4. Interpret the coefficient in front of IQ. (5 points)
5. What is the predicted change in wage if IQ increases by 10 points holding other factors fixed? (3 points)

STATA output

Ques A )

Min for education years = 9

Max for education years = 18

Ques b ) Equation is as follows :

Wage = 116.9916 + 8.30306 * IQ

Where R squared = 0.0955

Number of observation = 935

Ques C ) R squared = 0.0955

This means that the model explains 9.55% variations in the wages.

Part D ) Coefficient of IQ = 8.30306

1 point increase in IQ will increase wages by 8.30306 units.

Part E ) If IQ increases by 10 points, wages will increase by 10 * 8.3036 = 83.036 units

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