LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Chapter 6, Problem 6RQ
To determine
The ability bias in the estimation of the
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Discuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.
Consider an earnings function. In addition to the usual explanatory variables of experience and schooling, one can include variables for reflecting all of the following factors except:
A) industry premiums.
B) family background.
C) occupational premiums.
D) regional premiums.
E) unobserved heterogeneity
Imagine that the wage-schooling locus is given by w(s)=s^(1/3). What will be the optimal level of education for an individual to take if next period’s earnings in any given time are worth 95% of current earnings for that individual?
Answer is s=20/57
I need step by step calculations
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