A Subsample from the Current Population Survey Is Taken, on Weekly

question 16

Essay

A subsample from the Current Population Survey is taken, on weekly earnings of individuals, their age, and their gender. You have read in the news that women make 70 cents to the $1 that men earn. To test this hypothesis, you first regress earnings on a constant and a binary variable, which takes on a value of 1 for females and is 0 otherwise. The results were: $\widehat { E a m }$
= 570.70 - 170.72 × Female, $R ^ { 2 }$ =0.084, SER = 282.12.
(a)There are 850 females in your sample and 894 males. What are the mean earnings of males and females in this sample? What is the percentage of average female income to male income?
(b)You decide to control for age (in years)in your regression results because older people, up to a point, earn more on average than younger people. This regression output is as follows: $\widehat { E a m }$
= 323.70 - 169.78 × Female + 5.15 × Age, $R ^ { 2 }$ =0.135, SER = 274.45.
Interpret these results carefully. How much, on average, does a 40-year-old female make per year in your sample? What about a 20-year-old male? Does this represent stronger evidence of discrimination against females?

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Definitions:

Typeset

Typeset involves the art and process of arranging text and visual elements for printing or digital display, often for publications, books, or websites.

Demand Schedule

A table or graph that shows the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific time period.

Marginal Cost

The cost of producing one additional unit of a product, highlighting the concept of increasing or decreasing costs with production scale.

Typeset

The arrangement and composition of text material by means of types, including digital forms for printing or display.