Posted by **Katie** on Wednesday, December 14, 2011 at 4:12pm.

Instructions: Prepare your answers using Excel and show your work to get full or partial credit.

Question 1:

Using the file Wages.xlsx which contains information of working individuals, for a nationwide firm (Value 7 points).

a) Run Descriptive Statistics for the variables Education, Number of siblings, Mother’s years of education and Father’s years of education. Show your output. What is the mean of each of these variables? What is the number of observations (n)?

b) Estimate a regression equation of education on the number of siblings, mother’s years of education and father’s years of education as independent variables. Show the Excel output.

c) Write the Sample Regression Function

d) Interpret the coefficients of the regression

e) Are the coefficients statistically significant at the 95% confidence level? Write down the hypothesis that you are testing for each coefficient, and explain your conclusions.

f) Suppose that Tom has 3 siblings, and his mother has 10 years of education and his father has 14 years of education. Henry has no siblings, and his mother and father each has 16 years of education. Using the regression equation, calculate the estimated education for Tom and Henry

g) What is the predicted difference in years of education between Tom and Henry?

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