ECON 429 Midterm: Midterm 2 Practice Exam Answers

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Using the estimated wage equation from mexican data, they compute counterfactual wages for each mexican immigrant in the us (based on their observable characteristics in the us census) and plot the distribution. This is because the cohort effect is declining over time. 3. a: q0 = (5*0. 3 + 20 * 0. 3 + 30 * 0. 2 + 40 * 0. 2) (5 * 0. 2 + 10 * 0. 2 + 20 * 0. 3 + 30 * 0. 2 + 40. * 0. 1) = (1. 5 + 6 + 6 + 8) (1 + 2 + 6 + 6 + 4) = 21. 5 19 = 2. 5: positively selected, since migrants on average have higher wages (q0 > 0). 4: migration costs are decreasing in skills (high-skill workers face lower migration costs). Borjas (1987), migration costs are higher for high-skill workers: positive, everyone to the right of smin will want to migrate. Migrants will have higher average skills than non-migrants: yes.

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