This problem is inspired by a study of the “gender gap” in earnings in top corporate jobs. The study compares total compensation among top executives in a large set of U.S. public corporations in the 1990s. a) Let Female be an indicator variable that is equal to 1 for females and 0 for males. A regression of the logarithm of earnings onto Female yields ln(Earnings)=6.48-0.44Female+uˆ, SER = 2.65. (0.01) (0.05) iii) Does this regression suggest that female top executives earn less than top male executive? Explai
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This problem is inspired by a study of the “gender gap” in earnings in top corporate jobs. The study compares total compensation among top executives in a large set of U.S. public corporations in the 1990s.
a) Let Female be an indicator variable that is equal to 1 for females and 0 for males. A
regression of the logarithm of earnings onto Female yields ln(Earnings)=6.48-0.44Female+uˆ, SER = 2.65.
(0.01) (0.05)
iii) Does this regression suggest that female top executives earn less than top male
executive? Explain.
iv) Does this regression suggest that there is gender discrimination? Explain.
b) Two new variables, the market value of the firm (a measure of firm size, in millions of dollars) and stock return (a measure of firm performance, in percentage points), are added to regression:
ln(Earnings)=3.86-0.28Female+0.37ln(MarketValue)+0.004Return+uˆ, (0.03) (0.04) (0.004) (0.003)
n=46,670, R2 =0.345.
i) The coefficient on ln(MarketValue) is 0.37. Explain what this value means.
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