Empirical research for decision makers: Class exercise

Bruno Lanz, University of Neuchatel, Switzerland

Consider the following regression results:

log(wage)i = 0.389 + 0.082 · educi − 0.227 · femalei − 0.0056 · femalei · educi

(0.119) (0.008) (0.168) (0.0131)

+ 0.029 · experi − 0.00058 · exper2i + ei

(0.005) (0.00011)

where the outcome variable is log-hourly wages, educ is education measured in years,
female is a dummy variable equal to 1 if i is a female, zero otherwise, exper is the number
of years of experience, and ei is the residual. Heteroskedasticity-robust standard errors
are reported in parenthesis.

1. Interpret the constant term

2. Which coefficients are statistically significantly different from zero at 5 percent?

3. Write down the expression for average log-wage of men in the sample. What is the
impact of an additional year of schooling on wages men?

4. Write down the expression for average log-wage of women in the sample. What is
the impact of an additional year of schooling on wages women?

5. Is the difference in the marginal effect of education for men and women statistically
different from zero?

6. What is the marginal effect of an additional year of experience for an individual with
10 years of experience? What about 20 years?

7. How could you test if the impact of an additional year of experience is different for
women and men?

8. Write down average log-wages for someone with zero years of education and zero
years of experience. Do the same for someone with 10 years of education (and zero
years of experience). Can you conclude something about the wage gap (i.e. the
average difference in wages between men and women)?