Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please see question below. Thank you (13.6 The average wage depends on ability and years of education [5] as follows: w = $50,000 + 55,0005

Please see question below. Thank you

image text in transcribed
(13.6 The average wage depends on ability and years of education [5] as follows: w = $50,000 + 55,0005 for more able individuals w = $30,000 + 55,0005 for less able individuals In addition, 5:10 for more able individuals and 5:5 for less able individuals. a} Do employers discriminate based on the years of education? [3 marks] b} Based on the observed difference in the average wage between more and less able individuals, what is the implied return per year of education? How is this different from the actual return per year of education? [4 marks] c) What is an instrumental variable? Explain how using an instrumental variable can help you identify the actual return per year of education even if you can't observe the ability of individuals. [3 marks]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics

Authors: Campbell McConnell, Stanley Brue, Sean Flynn

21st Edition

1259723224, 9781259723223

More Books

Students also viewed these Economics questions

Question

1. To generate a discussion on the concept of roles

Answered: 1 week ago

Question

6. What information processes operate in communication situations?

Answered: 1 week ago

Question

3. How can we use information and communication to generate trust?

Answered: 1 week ago