Assume that the following annual earnings (Y) equations were estimated separately for union (subscript U) and non-union (subscript N) workers. ED denotes years of education (averaging 14 for union workers and 16 for non-union workers), SE N denotes years of seniority with the company (averaging 12 for union workers and 10 for non-union workers).
Y U = 22,000 + 1000 ED U + 1000 SEN U
Y N = 8000 + 2000 ED N + 500 SEN N
-What is the pure union earnings premium after adjusting the differences in their characteristics that impact their earnings?

Question

Assume that the following annual earnings (Y) equations were estimated separately for union (subscript U) and non-union (subscript N) workers. ED denotes years of education (averaging 14 for union workers and 16 for non-union workers), SE N denotes years of seniority with the company (averaging 12 for union workers and 10 for non-union workers).
Y U = 22,000 + 1000 ED U + 1000 SEN U 
Y N = 8000 + 2000 ED N + 500 SEN N 
-What is the pure union earnings premium after adjusting the differences in their characteristics that impact their earnings?

Quizplus · Accepted Answer

The Answer is E

Assume That the Following Annual Earnings (Y) Equations Were Estimated