Do liberal arts colleges pay economists more than they pay other professors? To find out we looked at a sample of 2929 small college faculty members and built a model of their salaries that included a number of variables four of which were estimated as given below: (standard errors in parentheses) Si = 36,721 + 817Mi + 426Ai + 406Ri + 3539Ti (259) (456) (24) (458) R2 = .77 n = 2929 Where: Si = the salary of ith college professor (in dollars) Mi = a dummy variable equal to 1 if the ith professor is a male and 0 otherwise Ai = a dummy variable equal to 1 if the ith professor is African American and 0 otherwise Ri = the years in rank of the ith professor Ti = a dummy variable equal to 1 if the ith professor teaches economics and 0 otherwise a. Carefully explain the meaning of the estimated coefficient of M. b. The equation indicates that African American earn $426 more than members of other ethnic groups, holding constant the other variables in the equation. Does this coefficient have the sign you expected? Why or why not? c. Is R a dummy variable? If not, what is it? Carefully explain the meaning of the coefficient of R.
Do liberal arts colleges pay economists more than they pay other professors? To find
out we looked at a sample of 2929 small college faculty members and built a model of
their salaries that included a number of variables four of which were estimated as given
below: (standard errors in parentheses)
Si = 36,721 + 817Mi + 426Ai + 406Ri + 3539Ti
(259) (456) (24) (458)
R2 = .77 n = 2929
Where: Si = the salary of ith college professor (in dollars)
Mi = a dummy variable equal to 1 if the ith professor is a male and 0 otherwise
Ai = a dummy variable equal to 1 if the ith professor is African American and 0
otherwise
Ri = the years in rank of the ith professor
Ti = a dummy variable equal to 1 if the ith professor teaches economics and 0
otherwise
a. Carefully explain the meaning of the estimated coefficient of M.
b. The equation indicates that African American earn $426 more than members of other
ethnic groups, holding constant the other variables in the equation. Does this
coefficient have the sign you expected? Why or why not?
c. Is R a dummy variable? If not, what is it? Carefully explain the meaning of the
coefficient of R.
d. What’s your conclusion? Do economists earn more than other professors at liberal art
colleges? Explain.
e. Assume that your professor is white, male economist who has been an assistant
professor at your college for three years. How much money does the equation predict
that he is earning?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 5 images
