BAi = 0 + 1incomei + i (1) BAi = 0 + 1incomei + 2cognitivei + i (2)

where BAi equals 1 if person i has completed a BA or an MA and equals 0 otherwise (that is, it equals 0 for those with an associate degree, high school degree or high school dropouts). incomei is standardized income and cognitivei is standardized cognitive skills. These two variables have a mean equal to 0 and a standard deviation equal to

1. a) [5 points] Interpret the estimated value of 1 in Model 1.