Use the data in WAGE2.RAW for this exercise.
(i) Estimate the model
log(wage) 5 b0 1 b1educ 1 b2exper 1 b3tenure 1 b4married
1 b5black 1 b6south 1 b7urban 1 u
and report the results in the usual form. Holding other factors fixed, what is the approximate difference in monthly salary between blacks and nonblacks? Is this difference statistically significant?
(ii) Add the variables exper2 and tenure2 to the equation and show that they are jointly
insignificant at even the 20% level.
(iii) Extend the original model to allow the return to education to depend on race and test whether the return to education does depend on race.
(iv) Again, start with the original model, but now allow wages to differ across four groups of people: married and black, married and nonblack, single and black, and single and nonblack. What is the estimated wage differential between married blacks and married nonblacks?
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