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Conduct a simple linear regression analysis to examine the relationship between ‘education' (the independent variable) and ‘wage' (the dependent variable). Using the Excel data file, prepare a 2000 word report using the following structure:

- Purpose (2 marks)
- Background (2 marks)
- Method (4 marks)
- Results (4 marks)
- Discussion (5 marks)
- Recommendations (3 marks)

In preparing your report you must address the following questions:

(a) Obtain summary statistics and histograms for the variables WAGE and EDUC. Discuss the data characteristics .

(b) Estimate the linear regression WAGE = β1 + β2EDUC + ε and interpret the slope.

(c) Calculate the residuals and plot them against EDUC. Are any patterns evident and, if so, what does this mean?

(d) Estimate the quadratic regression WAGE = α1 + α2EDUC2 + ε and interpret the results. Estimate the marginal effect of another year of education on wage for a person with 12 years of education, and for a person with 14 years of education. Compare these values to the estimated marginal effect of education from the linear regression in part (b).

(e) Construct a histogram of ln(WAGE). Compare the shape of this histogram to that for WAGE from part (a). Which appears to be more symmetric and bell-shaped?

(f) Estimate the log-linear regression ln(WAGE) = γ1 + γ2EDUC + ε and interpret the slope. Estimate the marginal effect of another year of education on wage for a person with 12 years of education, and for a person with 14 years of education. Compare these values to the estimated marginal effects of education from the linear regression in part (b) and quadratic in part (d)

Attachment:- data.xlsx

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91598856

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