Re: Econometrics

Posted by Do bats eat cats? on Jun 19, 2013; 5:54pm
URL: http://discussion-forum.276.s1.nabble.com/Econometrics-tp7582622p7582626.html

Is the answer β3 < 0?

Since Di takes the value 1 for females, the effect is to make the equation equivalent to Yi = (β0 + β2) + (β1 + β3)X1i + ui for females.
For males the regression is equivalent to Yi = β0 + β1X1i + ui (because Di takes the value 0).

So, the slope effect for males is β1 and for females it is β1 + β3.

Female workers' salary increases at a slower rate than male workers' salary with years of experience if β1 + β3 < β1, which is the same as β3 < 0.

Please correct me if there is something wrong with my understanding.