b) Explain what is meant by the standard error of the reported
coefficients. What factors increase/decrease the standard error
of
coefficients? (4 marks)
c) Use the standard errors to find the t-ratio
Question B2 (40 marks) ANSWER ALL PARTS Layla is investigating the relationship between monthly wages (W) and years of experience (EX). Layla is also interested in whether this relationship varies between males and females. She gathers information on monthly wages and years of experience for a sample of 60 workers, consisting of 40 males and 20 females. For the whole sample, Layla finds a linear correlation between years of experience and wages of 0.7. Layla also runs a regression of the form: = In(W;)= a + ß ln(EX;)+; Where In denotes the natural logarithm. The results of Layla's regression analysis are given in the Table below. Regression results: Dependent variable is In(W) intercept Whole sample 1.61 (1.29) 2.55 (0.60) Men 1.41 (1.22) 2.70 (0.80) Women 1.30 (0.80) 1.50 (1.04) In(EX) R2 0.49 N 60 Standard errors are in parentheses 0.44 40 0.22 20