Empirical Exercises for Chapter 3

On the Web site you will find the data file CPS92_98 (in Excel and Stata formats). This file
contains an extended version of the dataset used in Table 3.1 of the text for the years 1992 and
1998. It contains data on full-time, full-year workers, age 25-34, with a high school diploma or
B.A./B.S. as their highest degree. A detailed description is given in CPS92_98_Description,
available on the Web site. Use these data to answer the following questions.
1. Compute the sample mean for average hourly earnings (AHE) in 1992 and in 1998. Construct a
95% confidence interval for the population mean of AHE in 1992, 1998, and the change between
1992 and 1998.
2. In 1998 the value of the Consumer Price Index (CPI) was 163. In 1992, the value of the CPI was
140.3. Repeat (1), but use AHE measured in real 1998 dollars ($1998); that is, adjust the 1992 data
for the price inflation that occurred between 1992 and 1998.
3. If you were interested in the change in workers purchasing power from 1992 to 1998, would
you use the results from (1) or from (2)? Explain.
4. Use the 1998 data to construct a 95% confidence interval for the mean of AHE for high school
graduates. Construct a 95% confidence interval for the mean of AHE for workers with a college
degree. Construct a 95% confidence interval for the difference between the two means.
5. Repeat (4) using the 1992 data expressed in $1998.
6. Did real (inflation adjusted) wages of high school graduates increase from 1992 to 1998?
Explain. Did real wages of college graduates increase? Did the gap between college and high
school graduates increase? Explain, using appropriate estimates, confidence intervals, and test
statistics.
7. Table 3.1 in the textbook presents information on the gender gap in earnings for college
graduates. Prepare a similar table for high school graduates using the 1992 and 1998 data. Are
there any notable differences between the results for high school and college graduates?