Question 4 Empirical

Use cps12.dta for this question, which contains data for full-time, full-year workers, ages 25–34, with a high school diploma or B.A./B.S. as their highest degree. A detailed description is given in CPS12-Description file (in folder). In this question, you will investigate the relationship between a worker’s age and earnings. (Generally, older workers have more job experience, leading to higher productivity and higher earnings.)

• a. Run a regression of ln(AHE) (you have to create this variable it is not in the data set) on Age, Age2 (square of age: you have to create this variable it is not in the data set), Female, Bachelor, and the interaction term Female * Bachelor (you have to create this variable it is not in the data set). What does the coefficient on the interaction term measure?

– i. Alexis is a 30-year-old female with a bachelor’s degree. What does the regression predict for her value of ln(AHE)?

– ii. Jane is a 30-year-old female with a high school degree. What does the regression predict for her value of ln(AHE)? What is the predicted difference between Alexis’s and Jane’s earnings?

– iii. Bob is a 30-year-old male with a bachelor’s degree. What does the regression predict for his value of ln(AHE)?

– iv. Jim is a 30-year-old male with a high school degree. What does the regression predict for his value of ln(AHE)? What is the predicted difference between Bob’s and Jim’s earnings?

• b. After running the regressions from (i)-(iv), do you think if the effect of degree (HS or BA) on earnings is different for men and for women? 

Data