3. students who are working and therefore report their wages and hours of working, we estimate the following labour supply regression: log(hi) = -1.457 log(wi) - 0.042 male; +0.198 cari-0.022 studyi, (0.595) (0.200) (0.196) (0.011) where hi is hours of work per week, w; is hourly wage rate, male; is an indicator for males, cari is an indicator for car ownership, and study; is hours of study per week. a) Calculate the t-statistics for each estimate. Which estimates are statistically significant at the 5% level? b) What is the labour supply elasticity implied by the above regression? Is the labour supply curve estimated by the above regression downward sloping or upward sloping? c) Is the true labour supply curve downward sloping or upward sloping for these ECON333 students? Is their true labour supply elasticity positive or negative? d) Are the hours of work of people with lower (higher) wage a good proxy for the counterfactual hours of work of people with higher (lower) wage? Explain why or why not. e) Explain why the estimated elasticity of the above regression is likely biased. f) Briefly describe the research design in Fehr & Goette (2007) and explain how the research design can solve the endogeneity problem in (e).
3. students who are working and therefore report their wages and hours of working, we estimate the following labour supply regression: log(hi) = -1.457 log(wi) - 0.042 male; +0.198 cari-0.022 studyi, (0.595) (0.200) (0.196) (0.011) where hi is hours of work per week, w; is hourly wage rate, male; is an indicator for males, cari is an indicator for car ownership, and study; is hours of study per week. a) Calculate the t-statistics for each estimate. Which estimates are statistically significant at the 5% level? b) What is the labour supply elasticity implied by the above regression? Is the labour supply curve estimated by the above regression downward sloping or upward sloping? c) Is the true labour supply curve downward sloping or upward sloping for these ECON333 students? Is their true labour supply elasticity positive or negative? d) Are the hours of work of people with lower (higher) wage a good proxy for the counterfactual hours of work of people with higher (lower) wage? Explain why or why not. e) Explain why the estimated elasticity of the above regression is likely biased. f) Briefly describe the research design in Fehr & Goette (2007) and explain how the research design can solve the endogeneity problem in (e).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
subparts a, b and c please
Transcribed Image Text:3.
students who are working and
therefore report their wages and hours of working, we estimate the following labour
supply regression:
log(hi) = -1.457 log(wi) - 0.042 male; +0.198 cari-0.022 studyi,
(0.595)
(0.200)
(0.196) (0.011)
where hi is hours of work per week, w; is hourly wage rate, male; is an indicator for
males, cari is an indicator for car ownership, and study; is hours of study per week.
a) Calculate the t-statistics for each estimate. Which estimates are statistically
significant at the 5% level?
b) What is the labour supply elasticity implied by the above regression? Is the
labour supply curve estimated by the above regression downward sloping or
upward sloping?
c) Is the true labour supply curve downward sloping or upward sloping for these
ECON333 students? Is their true labour supply elasticity positive or negative?
d) Are the hours of work of people with lower (higher) wage a good proxy for the
counterfactual hours of work of people with higher (lower) wage? Explain why
or why not.
e) Explain why the estimated elasticity of the above regression is likely biased.
f) Briefly describe the research design in Fehr & Goette (2007) and explain how
the research design can solve the endogeneity problem in (e).
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