Do not use chatgpt. 5. Consider the empirical estimation of the returns to schooling in the equation w; = α + psi + ɛi(where w = Inw and s represents the years of schooling of individuals i).(a) Describe the ability bias problem. Briefly discuss how instrumental variable techniques couldovercome ability bias. Carefully state the assumptions of the IV estimator and provide oneexample of instrument used in the literature.(b) Suppose that, besides the years of schooling, you can observe some measures of the indi-vidual's ability, such as results from an IQ test. You decide to include this measure in theOLS wage regression above. Explain whether and how this strategy can solve the abilitybias problem. Would you recommend that IQ tests are used as instrument for schooling?Why or why not?

wheres represents the school year of individuals i.

Answered: ability bias problem. B

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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A possible important environmental determinant of lung function in children is the amount of cigarette smoking in the home. Suppose this question is studied by selecting two groups: Group 1 consists of 23 nonsmoking children 5-9 years of age, both of whose parents smoke, who have a mean forced expiratory volume (FEV) of 2.1 L and a standard deviation of 0.7 L; group 2 consists of 20 nonsmoking children of comparable age, neither of whose parents smoke, who have a mean FEV of 2.3 L and a standard deviation of 0.4 L.*8.31 What are the appropriate null and alternative hypotheses to compare the means of the two groups? *8.32 What is the appropriate test procedure for the hypotheses in Problem 8.31? *8.33 Carry out the test in Problem 8.32 using the criticalvalue method. *8.34 Provide a 95% CI for the true mean difference in FEV between 5- to 9-year-old children whose parents smoke and comparable children whose parents do not smoke. *8.35 Assuming this is regarded as a pilot study, how many…
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Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =-0.03+2.10RM+eHD R-squared =0.7 RML =0.06+1.60RM+eML R-squared =0.6 σM =0.15 where M is S&P/TSX Comp Index and RX is the excess return of stock X. What is the covariance and the correlation coefficient between HD and ML?
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