Problem

To test the effectiveness of a job training program on the subsequent wages of workers, we...

To test the effectiveness of a job training program on the subsequent wages of workers, we specify the model

where train is a binary variable equal to unity if a worker participated in the program. Think of the error term u as containing unobserved worker ability. If less able workers have a greater chance of being selected for the program, and you use an OLS analysis, what can you say about the likely bias in the OLS estimator of β1? (Hint: Refer back to Chapter 3.)

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Solutions For Problems in Chapter 7
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