Question

Using data from 50 workers, a researcher estimates Wage = β₀ + β₁ Education + β₂ Experience +β₃ Age + ε, where Wage is the hourly wage rate and Education, Experience, and Age are the years of higher education, the years of experience, and the age of the worker, respectively. A portion of the regression results is shown in the following table.

	Coefficients	Standard Error	t Stat	p-value
Intercept	7.58	4.42	1.71	0.0931
Education	1.68	0.37	4.54	0.0000
Experience	0.35	0.18	1.94	0.0580
Age	−0.06	0.05	−1.20	0.2363

a-1. Interpret the point estimate for β₁.

• As Education increases by 1 year, Wage is predicted to increase by 1.68/hour.

• As Education increases by 1 year, Wage is predicted to increase by 0.35/hour.

• As Education increases by 1 year, Wage is predicted to increase by 1.68/hour, holding Age and Experience constant.

• As Education increases by 1 year, Wage is predicted to increase by 0.35/hour, holding Age and Experience constant.

a-2. Interpret the point estimate for β₂.

• As Experience increases by 1 year, Wage is predicted to increase by 1.68/hour.

• As Experience increases by 1 year, Wage is predicted to increase by 0.35/hour.

• As Experience increases by 1 year, Wage is predicted to increase by 1.68/hour, holding Age and Education constant.

• As Experience increases by 1 year, Wage is predicted to increase by 0.35/hour, holding Age and Education constant.

b. What is the sample regression equation? (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)

y-hat = + Education + Experience + Age

c. Predict the hourly wage rate for a 29-year-old worker with 3 years of higher education and 2 years of experience. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

y-hat =

Answer 1

a-1

As Education increases by 1 year, Wage is predicted to increase by 1.68/hour, holding Age and Experience constant. Option C is correct here.

a-2

As Experience increases by 1 year, Wage is predicted to increase by 0.35/hour, holding Age and Education constant. Option D is correct here.

b.

y-hat = 7.58 + 1.68 * Education + 0.35 * Experience -0.06 *  Age

c.

Age = 29; Education = 3; Experience = 2

y^ = 7.58 + 1.68 * 3 + 0.35 * 2 - .06 * 29 = 11.58