ECON 3U03 Chapter Notes - Chapter 2: Quadratic Equation, Linear Model
12 Mar 2014
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(c) educ increseses -> residuals also increase, this suggests error var is larger for larger values of educ. F sr1 sr5 hold, there should not be any patterns evident in residuals. (d) estimated equations are. Extra year of education for black worker increases the wage rate higher than for a white worker. Similarly for female worker then male worker. (e) estimated quadratic equation; wage = 6. 08283 + 0. 073489educ2. Marginal effect is therefore: slope = d(wage)/deduc = 2(0. 073489)educ. For person with 12 years of education, estimated marginal effect of additional year of education is expected wage: 1. 7637. Linear model suggests increase wage of 1. 98 as a result of an additional year of education regardless of education attained. (f) (g) (h) estimated log-linear model is: ln(wage) = 1. 60944 + 0. 090408educ. We estimate that each additional year of education increases expected wage by about 9. 04% Marginal effect of education on wage: b2 * wage.
