Suppose we want to estimate the following wage equation using a sample of young people: wage₁ = Bo+ B₁educi + B₂experi + ẞзage; +ui where wage is hourly wage, educ is years of schooling, exper is years of job experience, and age is the age of individual i. Suppose only a few individuals in the sample have ever been unemployed (or out of labor force). So most individuals have studied at school or worked in their lives. Answer the following questions. (1) What is the problem with the scarcity of unemployment experience? What is likely to happen to the estimation results? (2) If we add a new variable, does the problem stated in (1) matters for the estimation of the coefficient of newly added variable?

Suppose we want to estimate the following wage equation using a sample of young people: wage₁ = Bo+ B₁educi + B₂experi + ẞзage; +ui where wage is hourly wage, educ is years of schooling, exper is years of job experience, and age is the age of individual i. Suppose only a few individuals in the sample have ever been unemployed (or out of labor force). So most individuals have studied at school or worked in their lives. Answer the following questions. (1) What is the problem with the scarcity of unemployment experience? What is likely to happen to the estimation results? (2) If we add a new variable, does the problem stated in (1) matters for the estimation of the coefficient of newly added variable?

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter13: Earnings, Productivity, And The Job Market

Section: Chapter Questions

Problem 3CQ

See similar textbooks

Similar questions

You are HR di, ector for a growing law firm in Tampa, Florida, which cu."ently has need of writing 30 legal briefs every hour. Each of your company's attorneys can write on average five briefs per hour. You are consid ring hiring four paralegals to shoulder the load; each pa alegal is a bit slower than the attorneys and can write on average only 2.5 briefs per hour. You scan the current wages in the Tampa area and notice that the attorneys in your company earn the local occupational median wage of $41.64 per hour, but that the prospective four paralegals will likely want to get paid their local occupational median wage of $23.66 per hour. a. Would /our company save money in the writing of the 30 legal briefs by hiring the four paralegals and firing some attorneys? b. The local Tampa Paralegal Union has observed that the Bureau of Labor Statistics projects that employment of paralegals over the next decade will rise considerably faster than the employment of lawyers…
The following model allows the return to education to depend upon the total amount of both parents' education, called pareduc: log(wage) = Bo + Bjeduc + Bzeduc-pareduc + Bzexper + Butenure + u. (i) Show that, in decimal form, the return to another year of education in this model is Alog(wage)/Aeduc = ßi + Brpareduc. What sign do you expect for B,? Why? (ii) Using the data in WAGE2, the estimated equation is log(wage) = 5.65 + .047 educ + .00078 educ-pareduc + (.13) (.010) (.00021) .019 exper + .010 tenure (.004) (.003) n = 722, R = .169. (Only 722 observations contain full information on parents' education.) Interpret the coefficient on the interaction term. It might help to choose two specific values for pareduc-for example, pareduc = 32 if both parents have a college education, or pareduc = 24 if both parents have a high school education-and to compare the estimated return to educ. (iii) When pareduc is added as a separate variable to the equation, we get: log(wage) = 4.94 + .097…
why is 1-l1 hours worked and not just l1 as it states in the question
. Among the adult population of a certain town 50% are male. 60% are wage-earner and 50% are 45 years age or over, 10% ofmales are not wage earmers and 40% of males are under 45. Make the best possible inference about the limits within which the percentage of persons (male or female) of 45 years or over are wage earner.s
Himig has two part-time jobs, as an assistant worker in a fast food chain (Job 1) and and as a receptionist at a small hotel (Job 2). Due to her heavy load in her studies, Himig can only render 12 hours a week in her jobs. She has determined that for every hour she works at Job 1, she needs 2 hours of preparation time, and for every hour she works at Job II, she needs one hour of preparation time, and she cannot spend more than 16 hours for preparation. If Himig makes Php 40 an hour at Job 1, and Php30 an hour at Job 2, how many hours should she work per week at each job to maximize her income? (Let x = Job 1; y = Job 2).
When Sue graduated from college, she got a job with a starting salary of $30.000. When Sue's sister Jan graduated five years later, her starting salary was $36.000. Jan likes to tease Sue about earning more than Sue did right out of college. Sue dlaims that she actually had the higher salary in real dollars. The Consumer Price Index rose 28 percent during the five years separating the sisters' graduations. Therefore, we can conclude that Jan earmed the highor real salary ts Sue eamed the higher real salary there isn't enough information to determine who earned the higher real salary both Sue and Jan earned the same real salary am Next
ECONOMETRICS: Using the information in picture 3a), Fill in the cells in the table below by providing the predicted log wage for each category: Domestic Workers (Min wage changed) Non-Domestic Workers (Min wage did not change) Before After
if the labor force is 250,000 and the total population 16 years of age or older is 300,000, the labor force participation rate is ?
Three examples of people over 15 years of age, not participating in the labour force are and 19
Labor economists studying the determinants of women’s earnings discovereda puzzling empirical result. Using randomly selected employedwomen, they regressed earnings on the women’s number of children anda set of control variables (age, education, occupation, and so forth). Theyfound that women with more children had higher wages, controlling forthese other factors. Explain how sample selection might be the cause ofthis result. (Hint: Notice that women who do not work outside the homeare missing from the sample.) [This empirical puzzle motivated JamesHeckman’s research on sample selection that led to his 2000 Nobel Prizein Economics. See Heckman (1974).]
MP believe that there is a causal relationship between earnings and years of schooling. They show you an estimate of the impact of years of schooling on annual earnings: There are two groups of individuals – group 1 and group 2. Group 1 on average earns £60,000 per year with the average level of post-compulsory education of 6 years, while group 2 earns on average £40,000 with the average post-compulsory education of 4 years. The MPs conclude that the annual return to an additional year of education is 25% using the following equation [(£60,000-£40,000)/40,000]/(6-4)=25%. Ignoring time preferences and discounting, and if both groups face the same cost of schooling, you need to explain to the MPs why this is not a good estimate of the annual return to an additional year of education. Propose methods to the MPs to deal with the problem
Referring to the information provided in the table, what is the adult labor-force participation rate in Meditor? Labor Data for Adults (ages 16 and older) in Meditor