The Effect of Race on Wage by Region. To what extent were black males paid less than nonblack males in the same region with the same levels of education.

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Presentation transcript:

The Effect of Race on Wage by Region

To what extent were black males paid less than nonblack males in the same region with the same levels of education and experience? Set up linear regression w/ wage controlling for race, education, experience, smsa indicator,

*** Linear Model *** (BAD) Call: lm(formula = wage ~ educ + exper + black.ind + smsa.ind + black.ind:region, data = Data.Set.1029, na.action = na.exclude) Residuals: Min 1Q Median 3Q Max Coefficients: Value Std. Error t value Pr(>|t|) (Intercept) educ exper black.ind smsa.ind black.indregion black.indregion black.indregion Residual standard error: on degrees of freedom Multiple R-Squared: F-statistic: on 7 and degrees of freedom, the p-value is 0

*** Summary Statistics for data in: Data.Set.1029 (BAD)*** $$$"Factor Summaries": region V4 V5 MW:6226 Length: Length: NE:5949 Class: Class: S:7991 Mode:logical Mode:logical W:5465 $$$"Numeric Summaries": wage educ exper black.ind smsa.ind V1 V2 V3 Min: e Inf -Inf 1st Qu.: e Mean: e Inf -Inf Median: e rd Qu.: e Max: e Total N: e NA's : e Std Dev.: e NA NA *** Summary Statistics for data in: Data.Set.1029 *** $$$"Factor Summaries": region V4 V5 MW:6226 Length: Length: NE:5949 Class: Class: S:7991 Mode:logical Mode:logical W:5465 $$$"Numeric Summaries": wage educ exper black.ind smsa.ind V1 V2 V3 Min: e Inf -Inf 1st Qu.: e Mean: e Inf -Inf Median: e rd Qu.: e Max: e Total N: e NA's : e Std Dev.: e NA NA

Graphs (Bad) Conical, Outliers?Tail?

Graphs (Bad) p.2

So, take log transformations of wage, experience+1 Subset Data Good==T So pretend graphs and linear reg. table here

Log(wage)= *Educ+.3242log(exper+1)+.1616(smsa.ind: 1 or 0)-.25(race.ind: 1 or 0) NE: NEB: S: S: W: W: F-stat: 1276, pval=0, Df~25,000

Conclusion: There are no regional racial differences after adjusting for education, experience, rural v. urban location, and race. Therefore, we can drop the interactive effect found in the linear regression model because of Occam’s Razor.