Question

1. The following regression model was used to explain log(wage): Log(wage) = $eta_0$ + $eta_1$educ + $eta_2$exper + $eta_3$exper$^2$ + $eta_4$tenure + u where educ=years of formal education, exper=years of labour market experience and tenure=years employed in current job. Based on a sample of 625 observations the following estimates were obtained: Dependent variable Log (wage) Independent variable educ 0.082 (0.009) exper 0.032 (0.007) exper$^2$ -0.0006 tenure (0.0002) 0.041 (0.015) intercept 2.451 (0.100) observations 625 R$^2$ 0.521 a) What is the interpretation of the coefficient on educ in equation above? b) What is the consequence of omitted tenure variable in the model? c) What is the consequence of including irrelevant variable in the model?

          1. The following regression model was used to explain log(wage):
Log(wage) = $eta_0$ + $eta_1$educ + $eta_2$exper + $eta_3$exper$^2$ + $eta_4$tenure + u
where educ=years of formal education, exper=years of labour market experience and tenure=years
employed in current job.
Based on a sample of 625 observations the following estimates were obtained:
Dependent variable
Log (wage)
Independent variable
educ
0.082
(0.009)
exper
0.032
(0.007)
exper$^2$
-0.0006
tenure
(0.0002)
0.041
(0.015)
intercept
2.451
(0.100)
observations
625
R$^2$
0.521
a) What is the interpretation of the coefficient on educ in equation above?
b) What is the consequence of omitted tenure variable in the model?
c) What is the consequence of including irrelevant variable in the model?

1. The following regression model was used to explain log(wage):
Log(wage) = eta0 + eta1educ + eta2exper + eta3exper^2 + eta4tenure + u
where educ=years of formal education, exper=years of labour market experience and tenure=years
employed in current job.
Based on a sample of 625 observations the following estimates were obtained:
Dependent variable
Log (wage)
Independent variable
educ
0.082
(0.009)
exper
0.032
(0.007)
exper^2
-0.0006
tenure
(0.0002)
0.041
(0.015)
intercept
2.451
(0.100)
observations
625
R^2
0.521
a) What is the interpretation of the coefficient on educ in equation above?
b) What is the consequence of omitted tenure variable in the model?
c) What is the consequence of including irrelevant variable in the model?

Added by Deborah G.

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