Tutorial 8.pdf - Vula
Tutorial 8.pdf - Vula
Tutorial 8.pdf - Vula
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SOLUTION:The regression of educ on exper and tenure yieldseduc = 13.57 − .074 exper + .048 tenure + ̂r 1n = 526, R 2 = .101.Now, when we regress log(wage) on ̂r 1 we obtainlog (wage) = 1.62 + .092 ̂r 1n = 526, R 2 = .207As expected, the coefficient on in the second regression is identical to the coefficienton educ in equation (3.19) on page 76 of Wooldridge. Notice that the R-squared fromthe above regression is less than that in (3.19). In effect, the regression of log(wage)on ̂r 1 explains log(wage) using only the part of educ that is uncorrelated with experand tenure; separate effects of exper and tenure are not included.7