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

question 38

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: = 570.70 - 170.72 × Female,R2=0.084,SER = 282.12.
(9.44)(13.52)
(a)Perform a difference in means test and indicate whether or not the difference in the mean salaries is significantly different.Justify your choice of a one-sided or two-sided alternative test.Are these results evidence enough to argue that there is discrimination against females? Why or why not? Is it likely that the errors are normally distributed in this case? If not,does that present a problem to your test?
(b)Test for the significance of the age and gender coefficients.Why do you think that age plays a role in earnings determination?

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain constant regardless of production volume, such as rent, salaries, and insurance premiums.

Direct Materials Price Variance

The difference between the actual cost and the standard cost of materials used in production, indicating how efficiently materials are being purchased.

Standard Price

Standard price is a predetermined cost assigned to materials and goods, used in budgeting and costing calculations.

Actual Price

The real price at which a transaction takes place, unaffected by any discounts or premiums.