LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 9, Problem 8P
To determine
Decompose the raw difference in average logged wages using the Oaxaca-Blinder decomposition.
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Consider the following log-wage regression results for women (W) and men (M) where wages are predicted by schooling (S) and age (A).
wW = 2.23 + 0.077Sw + 0.017Aw and wM = 2.33 + 0.0745SM + 0.026AM.
Sample means for the variables by gender are: women average a logged wage of 3.90, 12.7 years of schooling, and 40.8 years-old; men average a logged wage of 4.53, 14.2 years of schooling, and 43.9 years-old. Decompose the raw difference in average logged wages using the Oaxaca-Blinder decomposition. Specifically, decompose the raw difference into the portion due to differences in schooling, differences in age, and the portion left unexplained, possibly due to gender discrimination.
In exercise 1, the following estimated regression equation based on 10 observations was presented.
y^=29.1270+.5906x1+.4980x2Here SST=6724.125, SSR=6216.375, sb1=.0813, and sb2=.0567.
a) Compute MSR and MSE.
b) Compute F and perform the appropriate F test. Use α=.05.
c) Perform a t test for the significance of β1. Use α=.05.
d) Perform a t test for the significance of β2. Use α=.05.
Show the graphical form of the econometric error using sample regression line (SRL) and the population regression line(PRL).
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