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Unformatted text preview: n in which
each of the education of each of the existing individuals is “replaced”
with a randomly draw of education from the distribution that prevails
in the existing population, namely, π o , ..., π E ? The answers are as follows:
If ZCMA does not hold: the di¤erence in average wages is
E 4= ∑ πe (E [abil ] e =0 E E [abil jed = e ]) = ∑ πe E [abil jed = e ] e =0 If ZCMA does hold: there is no di¤erence in average wages. Melissa Tartari (Yale) Econometrics 19 / 93 Three Estimation Methods
Having established the key assumption under which ( βo , β1 ) are
identi…able  ZCMA  we are now in the business of estimating these
unknown parameters. How can we do that? Melissa Tartari (Yale) Econometrics 20 / 93 Three Estimation Methods
Having established the key assumption under which ( βo , β1 ) are
identi…able  ZCMA  we are now in the business of estimating these
unknown parameters. How can we do that?
First we need a random sample from the population:
f(yi , xi ) ji = 1, ..., ng. Melissa Tartari (Yale) Econometrics 20 / 93 Three Estimation Methods
Having established the key assumption under which ( βo , β1 ) are
identi…able  ZCMA  we are now in the business of estimating these
unknown parameters. How can we do that?
First we need a random sample from the population:
f(yi , xi ) ji = 1, ..., ng.
Observe that we can write yi = βo + β1 xi + ui for each i Melissa Tartari (Yale) Econometrics (2.9) 20 / 93 Three Estimation Methods
Having established the key assumption under which ( βo , β1 ) are
identi…able  ZCMA  we are now in the business of estimating these
unknown parameters. How can we do that?
First we need a random sample from the population:
f(yi , xi ) ji = 1, ..., ng.
Observe that we can write yi = βo + β1 xi + ui for each i (2.9) How do we use this data? There exist several estimation procedures: Melissa Tartari (Yale) Econometrics 20 / 93 Three Estimation Methods
Having established the key assumption under which ( βo , β1 ) are
identi…able  ZCMA  we are now in the business of estimating these
unknown parameters. How can we do th...
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 Fall '10
 DonaldBrown
 Econometrics

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