Question

What is the correlation between Female and ln(MarketValue),P_XU is ________ (Round your response to three decimal places)

Exercise 8.7 -Question Help This problem is inspired by a study of the "gender gap* in earnings in top corporate jobs [Bertrand and Hallock (2001) The study compares total compensation among top executives in a large set of U.S. public corporations in the 1990s (Each year these publicly traded corporations must report total compensation levels for their top five executives.) Let Fermale be an indicator variable that is equal to 1 for females and 0 for males. A regression of the logarithm of earnings onto Female yields In(Earnings)- 6.42-0.42Female, SER- 2.48. (0.01) (0.05) Calculate the average hourly eanings for top male and female executives. The hourly eamings for top male executives is $ 614.00 per hour. (Round your response to two decimal places.) The hourly earnings for top female executives is S 403.43 per hour. (Round your response to two decimal places.) What is the estimated average difference between carnings of top male executives and top female executives? The estimated average difference between earnings of top male executives and top female executives is $ 210.57 per hour. (Round your response to two decimal places.) What is the estimator of the standard deviation of the regression error? The estimator of the standard deviation of the regression error is 2.48. (Round your response to two decimal places.) Calculate the statistic for Female. The t-statistic for Female is -8.4. (Round your response to two decimal places.) Looking at the t-statistic, does this regression suggest that female top executives earn less than top male executives? OA. No. YB. Yes. Does this imply that there is gender discrimination?

Answer 1

x_2 rightarrow Female, x_3 rightarrow Mark t/value E(alpha_2) = beta_2 + beta_3 cov(x_2, x_3)/var(x_2) rightarrow omitted var bias equation alpha_2 = -.42, beta_2 = -.28, beta_3 = .37, Now -.42 = -.28 + .37 cov (x, u)/sigma^2_x thus cov(x, u)/sigma^2 x = -.14/.37 thus as rho (x, u) = cov (x, u)/sigma_x sigma_u & sigma_u/sigma_x = .49 p(x, u) = cov(x, u)/sigma_x middot sigma_u .sigm_x/sigma_x = cov(x, u)/sigma^2_lambda middot sigma_x/sigma_u p = -.14/.37 times 1/.49 = -.772200771 thus p_xu = -.772 using omitted variable bias equation correlation coefficient is -.772
using omitted variable bias equation

correlation coefficient is -.772