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AS.440.606.80.SP25 M07: Assignment

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Read Example 7.9 on page 233 carefully. Consider the following sample regression function:ย  log โก ( ๐‘ค ๐‘Ž ๐‘” ๐‘’ ) ^ = ๐›ฝ ^ 0 + .2 ๐‘ ๐‘œ ๐‘š ๐‘ ๐‘ค ๐‘œ ๐‘Ÿ ๐‘˜ + .05 ๐‘ ๐‘œ ๐‘š ๐‘ โ„Ž ๐‘œ ๐‘š ๐‘’ + .03 ๐‘ ๐‘œ ๐‘š ๐‘ ๐‘ค ๐‘œ ๐‘Ÿ ๐‘˜ โ‹… ๐‘ ๐‘œ ๐‘š ๐‘ โ„Ž ๐‘œ ๐‘š ๐‘’ + ๐‘œ ๐‘ก โ„Ž ๐‘’ ๐‘Ÿ ๐‘“ ๐‘Ž ๐‘ ๐‘ก ๐‘œ ๐‘Ÿ ๐‘  ( .01 ) ( .02 ) ( .005 ) where the variables wage, compwork,ย and comphome are defined respectively as hourly wage, = 1 if an individual uses a computer at work, and = 1 if an individual uses a computer at home. Which of the following statements is correct? ย 

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A.The estimates imply that the average wage of a person who uses a computer at work (but not at home) is about 20% above the average wage of a person who doesnโ€™t use a computer at all, holding all the other factors constant.
B.The estimates imply that the average wage of a person who uses a computer at home (but not at work) is about 5% above the average wage of a person who doesnโ€™t use a computer at all, holding all the other factors constant.
C.The estimates imply that the average wage of a person who uses a computer at home and at work is about 28% above the average wage of a person who doesnโ€™t use a computer at all, holding all the other factors constant.
D.All of the above.
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The question presents a log-linear regression: log(wage) = ฮฒ0 + 0.20ยทcompwork + 0.05ยทcomphome + 0.03ยทcompworkยทcomphome + other terms. Here, compwork = 1 if the person uses a computer at work (0 otherwise) and comphome = 1 if the person uses a computer at home (0 otherwise). Option 1: The estimates imply that the average wage of a person who uses a computer at work (but not at home) is about 20% above the average wage of a person who doesnโ€™t use a computer at all, holding all the other factors constant. - When compwork = 1 and comphome = 0, the predicted change in log(wage) is +0.20. To translate a log wage change into a percentage change in wage, we use exp(ฮ”log wage) โˆ’ 1. Here, exp(0.20) โˆ’ 1 โ‰ˆ 0.221,......Login to view full explanation

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