1. Merge the three datasets together. What do you notice about the merge? Did it work as you expected? [2 marks]
2. [16 marks]
a) How does the tendency to work for a foreign firm vary by gender, education, and age? Focus on working age individuals, 15 to 54 inclusive. Decide on an appropriate table or figure to show these relationships. All tables and figures should be cleanly labelled and easy to understand. [3 marks]
b) Estimate a regression that allows for testing the null hypothesis that individuals that work in a foreign-invested firm earn a higher salary/wage (use the ln of salary/wage). Restrict the sample to individuals ages 15 to 54. Write down an equation to represent this regression and explain all of its terms. Then estimate the regression. How do you interpret the coefficient? [3 marks]
c) A classmate suggests that foreign-invested firms hire better educated workers than other types of firms. Is this a threat to internal validity? If so, which threat is it and why? If it is a threat, how can you address it? Show results addressing it and interpret and changes in the estimated coefficients. [2 marks]
d) A classmate suggests that foreign-invested firms employ a lot of women and women tend to earn less than men. Using a loop, loop over men and women to estimate the regression in 5b) separately for men and women. Interpret the results. [3 marks]
e) Critically discuss whether the regressions estimated in (d) are internally valid. That is, do they represent the causal effect on salary of working in a foreign firm? Discuss all five threats discussed in section 9.2 of the text. [5 marks]
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