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ability bias problem. B

ability bias problem. B

Calculus For The Life Sciences
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter2: Exponential, Logarithmic, And Trigonometric Functions
Section2.CR: Chapter 2 Review
Problem 111CR: Respiratory Rate Researchers have found that the 95 th percentile the value at which 95% of the data...
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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 could overcome ability bias. Carefully state the assumptions of the IV estimator and provide one example 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 the OLS wage regression above. Explain whether and how this strategy can solve the ability bias problem. Would you recommend that IQ tests are used as instrument for schooling? Why or why not?
Transcribed Image Text: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 could overcome ability bias. Carefully state the assumptions of the IV estimator and provide one example 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 the OLS wage regression above. Explain whether and how this strategy can solve the ability bias problem. Would you recommend that IQ tests are used as instrument for schooling? Why or why not?
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