Eviews Homework Question - Re: Dummy Variables

[jim8z3]

Hi

I am fairly new to Eviews 6, I have being assigned the below home work question and am not sure how to proceed.

I welcome any help, tips or suggestions.

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Q. Suppose you hired by the Equal Opportunity Office to investigate whether there has been any salary discrimination on the basis of gender. In the file salary.wf1 the first 61 observations are for female employees and the last 32 observations are for male employees. Let G be a gender dummy variable that is equal to 1 for males and 0 for females.

a) Estimate the model Y = B1+ DG + e. How would you test whether male salaries are significantly greater that female salaries? Carry out this test at the 5% level of significance. What criticism could be levelled at this test?

b) Estimate the model Y = B1 + D(G) + B2(X) + B3(E) + B4(T)+ e , Repeat the test in part (a) Why is the test based on this model an improvement over that done in part (a)? What would you report to the state Equal Opportunity Office

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Note: D = Dummy Variable

I know how to do a test at 5% level of significance but am not sure what I am testing?

Look forward to hearing from you.

Jim