11.1. As mentioned in Example 10.1, Vella and Veerbeck (1998) included 16 variables plus a set of dummies in their analysis. Download an extract from their data (Wagepan.sav), and

a) Go through the variables and for each variable: write down how you think it relates to other variables (including whether the relation is positive or negative). Substantiate your answers.

b) Based on your answers to (a) formulate a model and estimate its parameters.

Vella, F., and Veerbek, M. (1998). Whoose wages do unions raise?A dynamic model of unionism and wage rate determinination for young men. Journal of Applied Econometrics, 61, 783–820.

Variables in the data set are:

exper           years of labor market experience

hours           annual hours worked

married        = 1 if married

union          = 1 if in union

lwage          log wage

exper²

black           = 1 if black

hisp             =1 if Hispanic

educ            years of schooling