Business, 15.10.2020 09:01, ethanw8973

Suppose you are interested in studying the relationship between education and wage. Moreâ specifically, suppose that you believe the relationship to be captured by the following linear regressionâ model, Wage= Î²o+ Î²1Education +u

Suppose further that the only unobservable that can possibly affect both wage and education is intelligence of the individual.

OLs assumpti(1): The cditional distribution of ui, given Xi, has a mean of zero. Mathematically, E(ui| Xi)=0

Which of the following provides evidence in favor of OLS assumptionâ #1? â

a. Covariance(Intelligence. Education) #0.
b. E(Intelligencel | Education= x)= E(Intelligence | Education= y), for all xâ y.
c. corr(Intelligence, Education) â 0
d. corr(Intelligence, Education= 0.

Answers: 1

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Suppose you are interested in studying the relationship between education and wage. Moreâ specifical...