92 Consider the following regression results ratios are in

9.2. Consider the following regression results ( ratios are in parentheses) =1286 + 104.97Xy- 0.026Xy + (-3.80) 1.20x,-+ (0.24) 0.69Xy (0.08) (4.67) (3.70) -19.47X 266.06X7i (-0.40 6.94) -118.64X110.61X (-3.04) -6.14) p2=0.383 n=1543 where Y = wife\'s annual desired hours of work, calculated as usual hours of work per year plus weeks looking for work Xy = after-tax real average hourly earnings of wife Xi = husband Xwife\'s age in years Xs = years of schooling completed by wife Xs = attitude variable, 1 = if respondent felt that it was all right for d\'s previous year after-tax real annual earnings a woman to work if she desired and her husband 0 otherwise agrees, Xy = attitude variable, 1 if the respondent\'s husband favored his wife\'s working, 0 = otherwise Xs = number of children less than 6 years of age = number of children in age groups 6 to 13 a. Do the signs of the coefficients of the various nondummy regressors make economic sense? Justify your answer. b. How would you interpret the dummy variables, X, and X? Are these dummies statistically significant? Since the sample is quite large, you may use the \"2-f rule of thumb to answer the question.

Solution

a)

1) The sign of variable X2 does not make sense as higher wage rate leads to less working hours as people may switch to more of leisure (backward bending supply curve which may be due to income effect which induces one to work less hours)

2) Similarly the sign of X3 is right as the wage of husband is higher female will be less willing to work and give more to their family.

3) The sign of X4 is not according to the expectation as with age people work less but the sign of coefficient may be reflecting the impact of experience as this will increase the chance of getting a job.

4) The sign of X5 makes sense as higher education level enables one to get jobs easily.

b)

The coefficient for X6 tells that those women whose husbands agrees to their working works 19.47 hours less than those whose husbands does not agrees. The variable is not statistically significant therefore the coefficient is not individually statistically significant.

The coefficient of X7 tells that The women whose husbands favored their wife working works 266 hours more on average than those whose wife do not favour. The t-value is large enough so the coefficient is individually statistically significant.