Assume that i has the properties of chapter 5. (a) Apply the rules of expectations from chapter

Assume that εi has the properties of chapter 5.

(a) Apply the rules of expectations from chapter 5 to equation (13.5) in order to derive equation (13.6).

(b) Replace equation (13.1) in equation (13.7) and repeat the analysis of part a to derive equation (13.8).

(c) Redefine x2i as equal to one when the characteristic in question is not present and zero when it is. Restate equations (13.1) through (13.9) with this definition. How do these restated equations differ from the originals? What, now, is the difference in E(yi) for observations with and without the characteristic?

How does this compare to the difference in equation€(13.9)?