Introductory Econometrics

1. Four students were asked to estimate a wage equation that takes into account gender, married status and an interaction between gender and married status. They could define the following dummy variables:

Being femaleis represented by the dummy variable F=1 if the individual is a female and 0 otherwise orbeing maleis represented by the dummy variable M=1 if the individual is a male and 0 otherwise. Being marriedis represented by the dummy variable MAR=1 if the individual is married and 0 otherwise whereas not being married is represented by the dummy variable NMAR=1 if the individual is not married and 0 otherwise.  The wage equation is also to include continuous variables for years of education (ED) and years of work experience (EX).Each student estimated a different specification. These specifications are given in equations (1.1), (1.2), (1.3) and (1.4) below:

 

(1.1)

(1.2)

(1.3)

(1.4)

 

1.a (4 marks)   Find the baseline person’s characteristics in each of the four models.

 

Using the property that one can always define one dummy variable with a combination of an alternative dummy answer the following:

1.b (2 marks)   Define the  in (1.1) in terms of the  in (1.2).

1.c (2 marks)   Define the  in (1.2) in terms of the  in (1.3).

1.d (2 marks)   Define the  in (1.3) in terms of the  in (1.4).