A categorical variable for gender takes m=2 values, male and female. The two gen

Question

A categorical variable for gender takes m=2 values, male and female. The two genders have been added to the data set as dummy variables called MALE and FEMALE. Only m-1=1 dummy variable was added to the regression to avoid the dummy variable trap, and the dropped dummy variable becomes the reference category picked up by the constant term. How should we interpret the coefficient on the dummy variable FEMALE, which takes the value FEMALE=1 if male and FEMALE=0 if female? How does being female affect the average years of schooling compared with the reference group (males).

A. Being female is associated with an average decrease in S of 0.401 years of schooling compared to being female, and this result is statistically significant at a level of significance of 5%. B

. Being female is associated with an average increase in S of 0.401 years of schooling compared to being female, and this result is statistically significant at a level of significance of 5%.

C. Being female is associated with an average increase in S of 0.170 years of schooling compared to being female, and this result is statistically significant at a level of significance of 5%

. D. Being female is associated with an average increase in S of 0.401 years of schooling compared to being female, and this result is NOT statistically significant at a level of significance of 5%.

Explanation / Answer

Solution

(D) Being female is associated with an average increase in S of 0.401 years of schooling compared to being female, and this result is NOT statistically significant at a level of significance of 5%

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