Suppose you are interested in studying the determinants of wages. You plan to use the following model:
Suppose you are interested in studying the determinants of wages. You plan to use the following model:
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
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Transcribed Image Text:6. Practice interpreting coefficients and R-squared
Suppose you are interested in studying the determinants of wages. You plan to use the following model:
wage — Во + Beduc + Bzеzрer+u
where
wage = annual salary, in thousands of dollars
educ = years of education
exper = years of work experience
You run the
ression, and obtain the
ving results:
wage
12+1.1 eduс + 1.5 егреr
n = 200
R = 0.07
The predicted wage for an individual with 12 years of education and 1 year of experience is
The predicted wage for an
individual with the same years of work experience but one additional year of education (that is, 13 years) is
v. The
marginal effect of one extra year of education is
The R of this regression indicates that v % of the variation in wage is explained by educ and exper together.
Suppose you suspect that wages might be affected by the weight of each individual, either through discrimination based on weight by employers or
decreased productivity, and therefore wages, brought on by an unhealthy weight. You decide to include body mass index (BMI) as a third explanatory
variable to your regression.
True or False: Assuming you use the exact same data set as before, adding the explanatory variable bmi will sometimes decrease the R².
O True
O False
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