MGEB12H3S Quantitative Methods in Economics University of Toronto at Scarborough Winter 2014 Assignment Due Date: Wednesday April 2, 2014

Time: 7 pm. Hand in your assignment in class or put it under the door of IC272 before the due date. Late assignment will NOT be accepted. Write clearly or type the solutions. Please try to keep your assignment to at most 4 pages. This assignment is worth 10% of your course mark. On the front page of your assignment, write down the following: o Your Last Name (please Print) o Your first and other names (please Print) o Your student number o MGEB12 Assignment

1.

(10 marks) To investigate possible gender discrimination in a firm, a sample of 100 men and 64 women with similar job descriptions are selected at random. A summary of the resulting monthly salaries follows: Average Salary $3,100 $2,900 Standard Deviation $200 $320 Sample Size 100 64

Men Women (a)

What do these data suggest about wage differences in the firm? Do they represent statistically significant evidence that average wages of men and women are different? Do these data suggest that the firm is guilty of gender discrimination in its compensation policies? Explain your opinion using the quantitative results.

(b)

2.

(15 marks) Suppose that a researcher, using wage data on 250 randomly selected male workers and 280 female workers, estimates the simple regression line as
Wage 12.52 2.12 Male (0.23) (0.36)

where Wage is measured in dollars per hour, Male is a binary variable that is equal to 1 if the person is male and 0 if the person is female. The numbers in parentheses are the standard errors. Define the wage gender gap as the difference in mean earnings between men and women. (a) What is the estimated gender gap? Is the estimated gender gap significantly different from zero? Construct a 95% confidence interval for the gender gap. In the sample, what is the mean wage of women? Of men? (6 marks) From the above information, discuss your opinion on gender gap and wage. (5 marks) Another researcher uses these same data but regresses Wages on Female, a variable that is equal to 1 if the person is female and 0 if the person is male. What is the estimated regression equation? (4 marks)

(b)

(c)