Answered: Imagine you regress earnings of…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Imagine you regress earnings of individuals on a constant, a binary variable ("Male") which takes on the value 1 for males and is 0 otherwise, and another binary variable ("Female") which takes on the value 1 for females and is 0 otherwise. Because females typically earn less than males, what would you expect the respective betas to look like? Explain your choice.

A) the coefficient will be positive for male and negative for female

B) the coefficient will be negative for male and positive for female

C) none of the OLS estimators to work because there's perfect multicollinearity

D) both the coefficient for male and for female to have positive signs

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