1.2 You read in the literature that there should also be returns to on-the-job training. To approximate on-the-job training, researchers often use the so-called Mincer or potential experience variable, which is defined as Exper = Age – Educ – 6.
a. Explain the reasoning behind this approximation (i.e. Exper = Age – Educ – 6). (2 pts.)
You incorporate the experience variable into your original regression
= -0.01 + 0.101 × Educ+ 0.033 × Exper – 0.0005 × Exper2,
(0.16) (0.012) (0.006) (0.0001)
R2= 0.34, SER = 0.405
What is the effect of an additionalyear of experience for a person who is 40 years old and had 12 years of education? (4 pts.)
What about for a person who is 60 years old with the same education background? (4 pts.)
Test for the significance of each of the coefficients of the added variables. (4 pts.)