# economic problems

Complete problem 6.28 at the end of Chapter 6 in the text and submit to your instructor. Complete all necessary portions in Excel and submit your completed Excel workbook and paper to your Instructor for grading. Completely answer sections a through g. **6.28.** Based on the Current Population Survey (CPS) of March 1995, Paul Rudd extracted a sample of 1,289 workers, aged 18 to 65, and obtained the following information on each worker:

Wage = hourly wage in $

Age = age in years

Female = 1 if female worker

Nonwhite = 1 if a nonwhite worker

Union = 1 if a union member

Education = years of schooling

Experience = potential labor market experience in years

The full data set can be found here as Table 6-16, and on the textbook's web site.

- Based on these data, estimate the following model, obtaining the usual regression statistics.

1n Wagei = B1 + B2 Age + B3 Female + B4 Nonwhite + B5 Union + B6 Education + B7 Experience + ui

where ln Wage = (natural logarithm of Wage) - How do you interpret each regression coefficient?
- Which of these coefficients are statistically significant at the 5% level? Also obtain the
*p*value of each estimated*t*value. - Do union workers, on average, earn a higher hourly wage?
- Do female workers, on average, earn less than their male counterparts?
- Is the average hourly wage of female nonwhite workers lower than the average hourly wage of female white workers? How do you know? (
*Hint*: interaction dummy.) - Is the average hourly wage of female union workers higher than the average hourly wage of female non-union workers? How do you know?

**Answers 2**

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