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9 93 identication the zcma ii what does 26 entail in

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Unformatted text preview: E [x jx ] = x and that, by the Law of Iterated Expectation (LIE), E [E [u jx ]] = E [u ]. We conclude that we only need to show that if E [u jx ] = 0 then E [ux ] = 0: we use the LIE and write E [ux ] = E [E [ux jx ]] = E [E [u jx ] x ] M elissa Tartari (Yale) Econometrics by ZCMA = E [0x ] = 0. 9 / 93 Identi…cation: the ZCMA II What does (2.6) entail in the wage example if U is ability and drive and X is education? Melissa Tartari (Yale) Econometrics 10 / 93 Identi…cation: the ZCMA II What does (2.6) entail in the wage example if U is ability and drive and X is education? It means that if we could observe ability and drive we would see that more educated individuals have on average the same ability and drive that those individuals that are less educated. Melissa Tartari (Yale) Econometrics 10 / 93 Identi…cation: the ZCMA II What does (2.6) entail in the wage example if U is ability and drive and X is education? It means that if we could observe ability and drive we would see that more educated individuals have on average the same ability and drive that those individuals that are less educated. The ZCMA reproduces what we may term the “perfect” experiment : Melissa Tartari (Yale) Econometrics 10 / 93 Identi…cation: the ZCMA II What does (2.6) entail in the wage example if U is ability and drive and X is education? It means that if we could observe ability and drive we would see that more educated individuals have on average the same ability and drive that those individuals that are less educated. The ZCMA reproduces what we may term the “perfect” experiment : imagine being able to assign education randomly to individuals; in particular, the assignment is independent of ability and drive; Melissa Tartari (Yale) Econometrics 10 / 93 Identi…cation: the ZCMA II What does (2.6) entail in the wage example if U is ability and drive and X is education? It means that if we could observe ability and drive we would see that more educated individuals have on average the same ability and drive that those individuals that are less educated. The ZCMA reproduces what we may term the “perfect” experiment : imagine being able to assign education randomly to individuals; in particular, the assignment is independent of ability and drive; then, by construction (that is, by...
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