Question 3

Consider the regression

a)Suggest a confounding factor that is different across firms but constant over time that makes not a causal effect of diversity on productivity of workers

Variables in the dataset are:

firmid: firm id. Data from the same firm id is from the same firm

year: year that data is collected. Data are collected from 2001 to 2007 every two years.

rate: average hourly wage rate of workers in a firm, as a proxy for productivity

diversity: proportion of workers who are female or within small ethnic groups (less than 2.5% of Australian population) in a firm

education: average years of education of workers in a firm

experience: average years of experience of workers in a firm