Problem Set IV

MIT (14.32) J. Angrist (angrist@mit.edu)

Sring 2!!"
due# Aril 14
A. From Wooldridge: 5.1, C5.2, 6.4, 7.3, 7.5, C7.10
B. The 14.32 web page o!"ai!# a! A$C%% da"a #e" &'$4.(AT) wi"h ob#er*a"io!# o! log wee+l, wage#,
log ho-rl, wage#, age, #e. &1/male), rae &1/Whi"e, 2/Bla+, 3/Amer. %!dia!, 4/ A#ia! or 'ai0i
%#la!der, 5/1"her), a!d ,ear# o0 #hooli!g 0or me! a!d wome! aged 25250 i! "he 3arh 1442 C'$.
1. Be#ide# #hooli!g, a *ariable "ha" 0ig-re# impor"a!"l, i! "he a!al,#i# o0 i!di*id-al wage ra"e# i# labor
mar+e" e.perie!e. Wage# ge!erall, i!rea#e a# we ge" more e.perie!e wor+i!g, "ho-gh !o" !ee##aril,
a" a o!#"a!" ra"e.
a. Co!#"r-" a mea#-re o0 po"e!"ial wor+ e.perie!e b, omp-"i!g:
age2ed-a"io!26.
Wha" i# "he ra"io!ale 0or "hi#5 Wh, doe# "hi# mea#-re po"e!"ial e.perie!e a!d !o" a"-al e.perie!e5
b. Che+ "he di#"rib-"io! o0 ,o-r o!#"r-"ed po"e!"ial e.perie!e *ariable "o #ee whe"her "he *al-e# ma+e
#e!#e. $e" a!, impla-#ible *al-e# "o mi##i!g, #o "ha" "he, will be e.l-ded 0rom "he #"a"i#"ial a!al,#i# i!
6-e#"io! 2.
2.a. Comp-"e "he m-l"i*aria"e regre##io! o0 log ho-rl, wage# o!
#e.
a 0-ll #e" o0 rae d-mmie#
a 6-adra"i 0-!"io! o0 po"e!"ial wor+ e.perie!e
,ear# o0 #hooli!g
a. A# we di#-##ed i! la##, he+ ,o-r regre##io! b, omp-"i!g "he m-l"i*aria"e #hooli!g oe00iie!"
ma!-all, i! "wo #"ep#: &i) regre## #hooli!g o! all "he o"her o*aria"e# a!d #a*e "he re#id-al# &ii) regre##
"he depe!de!" *ariable o! "he re#id-al#.
b. 'lo" "he e#"ima"ed e.perie!e pro0ile, a!d -#e al-l-# "o omp-"e "he le*el o0 e.perie!e a" whih
ear!i!g# reah "heir pea+, aordi!g "o "hi# model. 7ow old i# a high #hool grad-a"e who reahe# "hi#
le*el o0 e.perie!e5
&e."ra redi": -#e "he del"a me"hod "o omp-"e "he #"a!dard error o0 "he e.perie!e le*el a" whih ear!i!g#
pea+)
. 8e2e#"ima"e "he model allowi!g "he rela"io!#hip be"wee! po"e!"ial e.perie!e a!d wage# "o di00er b,
#e.. Co!#"r-" a! F2"e#" 0or "he !-ll h,po"he#i# "ha" "he rela"io!#hip be"wee! po"e!"ial e.perie!e a!d
wage# i# "he #ame 0or me! a!d wome!. Wha" happe!# "o "he oe00iie!" o! "he #e. d-mm, whe! "he
e00e"# o0 po"e!"ial e.perie!e di00er b, #e.5 Wha" do ,o- "hi!+ i# goi!g o! here5
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d. 8e2e#"ima"e "he model i! 2a, allowi!g "he rela"io!#hip be"wee! wage# a!d #hooli!g "o di00er 0or
Bla+# i! a #ample limi"ed "o Bla+# a!d Whi"e#. Co!#"r-" a! F2"e#" "o "e#" "he !-ll h,po"he#i# "ha" "he
re"-r!# "o a! addi"io!al ,ear o0 #hooli!g are "he #ame 0or bo"h raial gro-p#.
e. 8e2e#"ima"e "he model i! 2a, wi"h a 0-ll #e" o0 i!"era"io!# be"wee! rae &Bla+9!o!2Bla+) a!d #e..
7ow ma!, !ew *ariable# do ,o- !eed "o add "o ,o-r regre##io!5 :#i!g ,o-r oe00iie!"#, al-la"e "he
e.pe"ed log ho-rl, wage i! eah rae2#e. a"egor, 0or a 252,ear2old wor+er wi"h 12 ,ear# o0 #hooli!g.
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