A second thing to note is that in the Ht function the time in school t t is

A second thing to note is that in the ht function the

This preview shows page 3 - 7 out of 25 pages.

A second thing to note is that in the H(t) function, the time in school (t – t 0 ) is just elapsed time, conditional on the choice made regarding the time to first enroll (t 0 ). In Ghana this is pretty reasonable because grade repetition is not common (2-3% per year). 3
Lastly, it is inevitable that some of the components of these vectors, such as child motivation to learn and parental tastes for schooling, are not observed. In the second model discussed in the last lecture, if credit markets are perfect and schooling is valued only for the higher income it can bring in later years (and not as a consumption good in its own right), then household income/wealth would have no effect in any of these three equations. If an effect is detected (after fixing all possible estimation problems), than one or both of these assumptions is false. Under the first assumption it is also the case that there is no reason for children to delay their schooling, and schooling would also be “full-time” until the day comes to quit school. The empirical model estimated for the determinants of learning of child i in school j is: H ij = β 0 + β 1 S i + X Hi β X + Z Hij β Z + C Hi β C + ε Hij where S i is years of schooling. As always, estimates of this equation may be biased if ε Hij is correlated with the observed variables. First, such correlation could come about due to a potential selection bias problem: not all kids are enrolled in 4