(i) In the wage equation in Example 14.4, explain why dummy variables for occupation might be important omitted variables for estimating the union wage premium.
(ii) If every man in the sample stayed in the same occupation from 1981 through 1987, would you need to include the occupation dummies in a fixed effects estimation? Explain.
(iii) Using the data in WAGEPAN.RAW, include eight of the occupation dummy variables in the equation and estimate the equation using fixed effects. Does the coefficient on union change by much? What about its statistical significance?
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