A regression of wages on gender on individuals ( men) yields ( if male). The average wage in the sample is
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2 marks, −0.666666666666667EconometricsDummy variables and functional formsDummy variables and the dummy variable trapEasyabout 2 min
DSE 2015 Question 41: Dummy variables and functional forms
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A regression of wages on gender on 200 individuals (150 men) yields Wᵢ=300-50Dᵢ+uᵢ (Dᵢ=1 if male). The average wage in the sample is (A) Rs 250 per day (B) Rs 275 per day (C) Rs 262.50 per day (D) Rs 267.50 per day
Also written as: A regression of wages on gender on 200 individuals (150 men) yields W_i=300-50D_i+u_i (D_i=1 if male). The average wage in the sample is
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What this question tests
This question is on Dummy variables and the dummy variable trap, part of Dummy variables and functional forms in Econometrics.
Using 0-1 variables for categories, how to read their coefficients, and the trap of too many.
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