In this exercise, you will run multiple regressions with interaction terms. First, consider the following regression with an interaction between the two binary regressors, collgrad and union: wage = Bo + B, union, + 82collgrad; + Bunion collgrad. + this To estimate this model, generate an interaction term between collgrad and union. Use the regress command to estimate the OLS coefficients. (a) What is the base category in this model? What is the average wage for workers in this base category?
(b) What is the difference in average wage for non-college graduates in a union and non-college graduates not in a union? Please report a positive number.
(c) What is the difference in average wage for college graduates in a union and college graduates not in a union? Please report a positive number. Next, consider the following regression with an interaction term between tt1_exp and union: Inwage; = Bo + Biunion + Bottl_exp. + Bzunionxttl_exp. +. To estimate this model, generate an interaction term between ttl_exp and union. Use the regress command to estimate the OLS coefficients.
(d) For non-unionized workers, what is the average percentage change in wage when experience increases by one year?
(e) For unionized workers, what is the average percentage change in wage when experience increases by one year?