Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 13

Use the MROZ.RAW data for this exercise.

(i) Using the 428 women who were in the workforce, estimate the return to education by OLS including exper, exper2, nwifeinc, age, kidslt6, and kidsge6 as explanatory variables. Report your estimate on educ and its standard error.

(ii) Now, estimate the return to education by Heckit, where all exogenous variables show up in the second-stage regression. In other words, the regression is log(wage) on educ, exper, exper2, nwifeinc, age, kidslt6, kidsge6, and Compare the estimated return to education and its standard error to that from part (i).

(iii) Using only the 428 observations for working women, regress on educ, exper, exper2, nwifeinc, age, kidslt6, and kidsge6. How big is the R-squared? How does this help explain your findings from part (ii)? (Hint: Think multicollinearity.)