The following Mincer equation has been used to estimate wages: ln (Y)= ln (Y_o)+ $\beta$₂EDU + $\beta$₃ EXPER + $\beta$₄EXPER² + e Where Y is income,Y₀ is income of someone with no education or experience,EDU is years of education and EXPER is experience in the field.If you suspect males earn higher wages than females and that the wage difference increases with education how would you adjust the econometric model to estimate wages? A)include a binary variable for gender,MALE B)include an interaction term equal to MALE* EXPER C)include an indicator variable for MALE and one for FEMALE D)include a binary variable for MALE and an interaction term equal to MALE * EXPER

Question

Quizplus · Accepted Answer

including a binary variable for MALE will allow for estimation of the wage gap between males and females. Including an interaction term MALE*EXPER will capture the effect of experience on the wage gap between males and females, as the question suggests the wage difference increases with education.

The Following Mincer Equation Has Been Used to Estimate Wages β\betaβ

The Following Mincer Equation Has Been Used to Estimate Wages $\beta$