Question: Examine the factors determining hourly wages using the dataset on wages provided on Moodle (this is the dataset you have been using in the labs). Your answer should contain a discussion of theories of wage determination e.g. theories of human capital, theories of discrimination and so on. Set out the hypotheses you are testing and the models you plan to estimate using regression analysis. Comment on the size, sign and significance of the regression coefficients (β’s). Carry out diagnostic tests and discuss possible problems, such as multicollinearity, heteroscedasticity, autocorrelation, simultaneous equations bias and the limitations of your results. Present your results clearly in tables and provide a full discussion that explains your findings clearly to the reader.

Data: the data are available on Moodle and are from Dougherty’s dataset.

Literature: there is a vast literature on the determinants of wages across individuals. Carry out a literature search using the Social Science Citation Index to locate relevant literature (Web of Knowledge database). Much will depend on your findings from this search as it will provide the basis and rationale for the hypotheses you wish to test and the models you estimate. You should also discuss your results in the context of previous results and findings published in the literature.

Write-up your results clearly and carefully. Please do not simply cut and paste output from SPSS – look at how the results are presented in the article by Chang and Wong (2004) and follow that style of presentation. Note that results that reject hypotheses are just as valuable as results that confirm hypotheses. The key thing is to write up your results as clearly and impartially as possible using your knowledge of quantitative methods and regression analysis.