Suppose we are interested in knowing whether longer experience in a white collar job has any effect on wages. Suppose, for the purposes of this example, that work experience as a white collar is a categorical variable.
bcuse keane, clear
xtset id year
xtreg lwage i.expwc, fe
My question relates to the interpretation of this effect. Some have answered this question by saying that the interpretation of categorical variables is the same as in the case of OLS -- i.e. compared to those who do not have experience (the reference category) those who have one year of experience earn 0.2 more.
The alternative is to say that the effect of a change in work experience (say from 0 to 1) makes that individual earn 0.2 more.
If it is the latter case, how is one to interpret the reference category?
a) Is it that those who have changed their work experience are earning 0.2 more than they were earning when they had no work experience b) Is is that, compared to those who (assuming it's possible) have changed and now they have no work experience (say a move from 2 years to 0 years), those who have now one year (moving from 0-1) earn 0.2 more?
bcuse keane, clear
xtset id year
xtreg lwage i.expwc, fe
My question relates to the interpretation of this effect. Some have answered this question by saying that the interpretation of categorical variables is the same as in the case of OLS -- i.e. compared to those who do not have experience (the reference category) those who have one year of experience earn 0.2 more.
The alternative is to say that the effect of a change in work experience (say from 0 to 1) makes that individual earn 0.2 more.
If it is the latter case, how is one to interpret the reference category?
a) Is it that those who have changed their work experience are earning 0.2 more than they were earning when they had no work experience b) Is is that, compared to those who (assuming it's possible) have changed and now they have no work experience (say a move from 2 years to 0 years), those who have now one year (moving from 0-1) earn 0.2 more?
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