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Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge
Edition 6ISBN: 130527010XIntroductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge
Edition 6ISBN: 130527010XUse the data set WAGE2.RAW for this exercise.
(i) Use the variable KWW (the "knowledge of the world of work" test score) as a proxy for ability in place of IQ in Example. What is the estimated return to education in this case?
(ii) Now, use IQ and KWW together as proxy variables. What happens to the estimated return to education?
(iii) In part (ii), are IQ and KWW individually significant? Are they jointly significant?
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(i)
Using the variable 
as a proxy for the ability in place of 
and estimating the model as represented in column (2) of Table 9.2 of example 9.3 and as given by:
The result is:
The estimated return to education is given by the coefficient of 
which is 0.057628
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