Hamermesh and Biddle (1994) used measures of physical attractiveness in a wage equation. Each person in the sample was ranked by an interviewer for physical attractiveness, using five categories (homely, quite plain, average, good looking, and strikingly beautiful or handsome). Because there are so few people at the two extremes, the authors put people into one of three groups for the regression analysis: average, below average, and above average, where the base group is average. The regression results for men are: log(wage)= β1 – 0.164belavgi + 0.016abvavgi + other factors1 + ûi.

n= 700,

R2 = 0.403.

Here, other factors, include education, experience, tenure, marital status and race.

Requried:

a. How much less do those with below average looks earn relative to an average looking man who is the same in other respects? Answer in terms of percentage.

b. The authors are reporting R2 instead of R2. What do you think is the