Write the model specification and define the variables for a multiple regression model to predict wages in U.S. dollars as a function of years of experience and country of employment, indicated as Austria, France, Germany, Japan, and United States
What will be an ideal response?
Based on the data, the indicators are:
Y = ?0 + ?1X1i + ?2X2i + ?3X3i + ?4X4i + ?5X5i + ?i
Where
Yi = wages
X1 = Years of experience
X2 = 1 for Austria, 0 otherwise
X3 = 1 for France, 0 otherwise
X4 = 1 for Germany, 0 otherwise
X5 = 1 for Japan, 0 otherwise
The excluded category consists of wages in the United States.
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