Statistics Question: Regression?

Question

3. As part of an evaluation, we estimate a simple regression of wages on participation in a basic skills program. Test statistics and p-values (significance) are in parentheses. (8 points each part)

wages = -0.28 basic skills + 1.24

(t=-2.53) (t=25.4)

(p=0.011) (p=0.000)

Wages = earnings per year in $1000 per month.

Basic skills = 1 if in basic skills program; =0 if not in program.

a) What are the predicted earnings of basic skills program participants?

i. $1240

ii. $280

iii. $960

iv. -$280

b) The model predicts that wages of participants are:

i. $1240 higher than wages of non-participants.

ii. $280 higher than wages of non-participants.

iii. $280 lower than wages of non-participants.

iv. $960 higher than wages of non-participants.

v. 28 percent higher than wages of non-participants.

Answer 1

a) iii.$960

=(-0.28+1.24)*1000

b)

iii.$280 lower than wages of non-participants.

1240-960=280