Question

At what level of exper does additional experience actually lower predicted ln(wage)? How many people have experience more than the turning point in this sample?

lnwage = 0.128 + 0.090 (educ) + 0.041(exper) - 0.00071(exper^2)

Answer 1

In case if we calculate Wages of employee considering their education and work experience with given equation then

lnwage = 0.128 + 0.090 (educ) + 0.041(exper) - 0.00071(exper^2)

I believe we need to more information to solve this question as Sample value is not mention in this question however i will try to solve this equation with some assumption numeric value.

Its tough to give some numeric value for Education but lets assume for certain education like

Post graduate - 10 point

Graduate - 5 Point            Similarly Experience lets consider person having 5 years and 10 years experience in two scenario

So then as per equation

Inwage = 0.128+0.090(10)+0.041(5)-0.00071(5^2)

            = 0.128+0.9+0.205-0.017

          = 1.216

In other case if Post graduate 10 years exper

lnwage = 0.128 + 0.090 (10) + 0.041(10) - 0.00071(10^2)

          = 0.128+0.9+0.41-0.071

         = 1.367

Now suppose

Education- Graduate (5 points) experience 5 year and 10 years

lnwage = 0.128 + 0.090 (5) + 0.041(5) - 0.00071(5^2)

            =

              = 0.128+0.45+0.205-0.017 = 0.766

lnwage = 0.128 + 0.090 (5) + 0.041(10) - 0.00071(10^2)

            = 0.128+0.45+0.41-0.071

              = 0.917

With these calculation it is very clear that additional experience actually lower predicted ln(wage).

Turning point Ananlysis: - I have analyzed two scenario- 1. Graduate with 5/10 years experience and Post Graduate with 5/10 years of experience and with this turning point is Higher studied people with more experience get more wages than lower studied people even after 10 Years experience. So A post graduate employee with 5 years experience get more wages than a graduate employee with 10 years experience.