ECON 151 Lecture Notes - Lecture 8: Observational Error, New York Law School, Conditional Expectation

• School: Santa Clara University
• Department: Economics
• Course: ECON 151
• Professor: Bouguen

Document Summary

Using ols strategies, return to education is evaluated between 6% and 10%; Last psadapoulous & patrinos paper (2018) estimate the average return to be 9% Returns are very stable across time: no declining returns. Returns are slightly higher in low income countries and among girls. Yet returns remain high in high-income countries (around 8. 5%) No evidence of declining returns: race between education and technology? (see below) Y = s + (9) with s education (schooling) and y income. Yet, we only observe s obs = s + where is the measurement error. We assume cov(s, ) = 0;cov( , ) = 0 covariance between education and measurement error = 0. We then call this measurement error classical measurement error . Since cov(s, ) = 0, at has to be a random error, not a voluntary error. Y = s + (10) with s education (schooling) and y income.