Question

In your final specification, you allow for the binary variables to interact. The results are as follows:

Earn = 0.14 + 0.093 × Educ + 0.032 × Exper – 0.0005 × Exper2 - 0.158 × Female + 0.173 × Married – 0.218 × (Female × Married),

(0.16) (0.011) (0.006) (0.001) (0.075) (0.080) (0.097)

R2 = 0.44, SER = 0.375

A) What is the gender wage gap for married individuals?

B) What is the gender wage gap for single individuals?

Answer 1

Answer :

Binary variable categorization :

Female = 1, Male = 0 for Female dummy

Married = 1 , Single = 0 for Married dummy

A) Gender wage gap for married individuals:

Note: Coefficients till Exper2 are not taken into account since while caclculating gap they will be automatically eliminated.

For Male married:

-0.158*0 + 0.173*1 - 0.218*0*1 = 0.173

For Female married :

-0.158*1 + 0.173*1 - 0.218*1*1 = -0.203

The gap is = 0.173 - (-0.203) = 0.376

Thus on an average the gender wage gap for married individuals is (Male earn higher by) = 0.376

A) Gender wage gap for single individuals:

Note: Coefficients till Exper2 are not taken into account since while caclculating gap they will be automatically eliminated.

For single Male:

-0.158*0 + 0.173*0 - 0.218*0*0 = 0

For single Female:

-0.158*1 + 0.173*0 - 0.218*1*0 = -0.158

The gap is = 0 - (-0.158) = 0.158

Thus on an average the gender wage gap for single individuals is (Male earn higher by) = 0.158