Suppose you wanted to estimate the effect of being educated on being in the laborforce. You estimate a model with two variables, LF is a binary variable = 1 if theperson is participating in the labor force and the variable educ measures the numberof years of education a person has received. You get the following estimatedregression:LF = 0.1 +0.05educWhich of the following is the correct interpretation about the effect of an additionalyear of education?An additional year of education increases the probability of participating in the labor force by5 percentage points.An additional year of education increases the probability of participating in the labor force by15 percentage points.O A 1% increase in education increases the number of those participating in the labor force by5 percentage points.A 1% increase in education increases the number of those participating in the labor force by5 people.A additional year in education increases the number of those participating in the labor forceby 0.05 percentage pointsA additional year in education increases the number of those participating in the labor forceby 0.05%

Answered: Suppose you wanted to estimate the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose you wanted to estimate the effect of being educated on being in the labor
force. You estimate a model with two variables, LF is a binary variable = 1 if the
person is participating in the labor force and the variable educ measures the number
of years of education a person has received. You get the following estimated
regression:
LF = 0.1 +0.05educ
Which of the following is the correct interpretation about the effect of an additional
year of education?
An additional year of education increases the probability of participating in the labor force by
5 percentage points.
An additional year of education increases the probability of participating in the labor force by
15 percentage points.
O A 1% increase in education increases the number of those participating in the labor force by
5 percentage points.
A 1% increase in education increases the number of those participating in the labor force by
5 people.
A additional year in education increases the number of those participating in the labor force
by 0.05 percentage points
A additional year in education increases the number of those participating in the labor force
by 0.05%

Expert Solution

Step 1

Regression equation states the relationship between the dependent variable and the independent variable.

The regression equation measures the relationship between dependent variable and independent variable quantitively, that is, it measures the magnitude of change in dependent variable due to change in independent variable.

Dependent variables are the variables which are influenced by the variable inside the model.

Independent variables are the variables which are not influenced by the variables inside the model.

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