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Michael believes the following model is correct: Wage = B0+ B1*Schooling + B2* Experience + B3*Experience2+ u Anna thinks the following model is correct: Wage

Michael believes the following model is correct:

Wage = B0+ B1*Schooling + B2* Experience + B3*Experience2+ u

Anna thinks the following model is correct:

Wage = B0+ B2* Experience + B3* Experience2+ u

  • (a) Anna decides to follow Michael 's model. If Anna's model is correct, will Michael's specification suffer from omitted variables bias?
  • (b) If Anna is right, what are the negative impacts of following Michael 's specification?

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Intermediate Microeconomics

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