Question

The following model has been estimated using a large company's human resource date:

log(wage) = 1.439 + 0.0834 x edu + 0.0512 x exper + 0.1932 x male

where wage is hourly wage, edu is years of schooling, exper is years of relevant work experience, and male is a dummy variable for male

(i) How much more do men at the firm earn than women, on average?

(ii) How much per hour will a fresh male college graduate (16 years of schooling, no experience) earn at this firm?

Answer 1

1. For the average wage of male we need to male = 1 in our regression and for female we need to put male = 0.

So, we see that the differene between average wage of male and a female worker is the cofficient of male in our regression.

So, on an avegrage the earn 19.32 % more hourly wage as compared to females.

2. For this we need to estimate the following dummy

log(wage) = 1.439 + 0.0834 x 16 + 0.0512 x 0 + 0.1932 x 1 = 1.439+1.3344+0.1932 = 2.966

They earn, on an average, 2.9666 dollars.