Sketched out answers Final Econ140A 2011Fall

7 a first rewrite this estimator and then take the

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Unformatted text preview: n. 7. a. First rewrite this estimator: ( ̃ ) and then take the expectation: [̃] [ [̃] b. Using the previous result: [̃] [ [ ( ) page 3 [ ( ) c. To show that the variance is greater than the OLS estimator note that ̃ is unbiased (shown in (a)) and that it is linear in , with weights ̅. ̃ must have a larger variance. Since OLS is the BLUE, 8. For individuals of equal education, the predicted ( ) BLACK/WHITE gap is The coefficient on the dummy is a positive 1.7%. But that’s not very interesting because it tells us the wage difference at age zero, when relatively few people are employed. In principle,...
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