Question

1. Suppose you have data on wages (Yi) for the population who enrolled in an undergraduate program and you know whether each individual has a BA degree (Di) (i.e. the population consists of college drop outs and college graduates). You regress wages (measured in Canadian dollars per hour) on the education (BA degree) dummy variable and get the following population regression function log(Yi) = 1.06 + 0.52Di

   1. Think of the model as a descriptive model. Interpret the estimated slope coefficient in this context.

   2. Suppose a test was conducted, nationally, yesterday. Samson got information about the test scores for each individual (x₂). He added the score as a control variable and he got the following results log(Yi) = 0.80 + 0.45D + 0.04x₂. What can you tell about the causal effect of obtaining BA degree?

Answer 1