Business, 17.07.2020 04:01 teetee7561

The following model allows the return to education to depend upon the total amount of both parents’ education, called pareduc: log(wage)=β0+β1educ +β2educ·pareduc +β3exper +β4tenure+u❑
a) What is the return to another year of education in this model?
Holding all other factors fixed we have
∆ log(wage)=β1∆ educ+ β2∆ educ·pareduc=(β1+β2· pareduc)∆ educ
Dividing both sides by ∆ educ gives the result (β1+β2· pareduc)
b) What sign do you expect for β2? Why

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