Econ142_spring2008_problemset_3 - University of California...

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University of California, Berkeley Prof. Andrea Weber Department of Economics Spring 200 8 Applied Exercise # 3 Due T hurs day 03/20 /0 8 – This exercise examines the return to education on wages in an instrumental variables framework, using co llege proximity as an instrument for education . It will be helpful to read the paper by David Card ( 1995 ) in the reader as you do this problem set. Feel free to work in groups. E ach student must hand in their own solution to the problem set using own words to explain and interpret the results. Data: The data are drawn from the NLS Young Men Cohort. We have a sample of 14 - 24 year old men for whom the data contains information about family background, living arrangements , and region of residence in 1966 . A f ollow up survey in 1976 provides information on educational attainment and earnings for the same individuals (for details see Card 1995) . Access the data on bspace site for Econ C142 : problem set 3 / nls .dta (STATA 9 format) . The observational unit of the data is the individual. The data set has 3 010 observations . The key variables for this exercise are: lwage76 natural log of hourly wage in 1976 age 76 age of the person in 1976 black indicator variable equal to 1 if the person is black , zero otherwise ed 76 the individual’s completed years of schooling in 1976 daded father’s completed years of schooling ; set equal to sample mean if missing nodaded father’s education imputed momed mother’s completed years of schooling ; set eq ual to sample mean if missing nomomed mother’s education imputed famed father and mother educational class 1 -9 momdad14
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