Suppose That in an Effort to Explain Variation in Wages,you

question 25

Essay

Suppose that in an effort to explain variation in wages,you collect a panel data set with 12,300 total observations over 3 different years with the independent variables as experience,education,married (dummy variable is 1 if married and 0 if not married)and male (dummy variable is 1 if male and 0 if female).
a)How do you estimate a first-differenced model for these data? Explain in as much detail as possible.
b)What are the advantages of estimating a first-differenced model?
c)What are the drawbacks of estimating a first differenced model for this scenario?

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