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(Solved): Consider the following model for wages: ln(wage)=0+1 educ +2 exper +3 tenure + ...
Consider the following model for wages: ln(wage)=?0?+?1? educ +?2? exper +?3? tenure +?4? married +?5? female +u Which of the following will not cause our ZCM assumption, E(u?X)=0, to fail to hold? Omitting ability from the model, when we expect that ability affects productivity and thus wages, and when we expect a correlation between ability and education. We have misspecified the model because we have not properly accounted for the curvature in the relationship between wages and experience. We should have also included exper 2 in the model. Measurement error in the education variable, educ, such that educ =educ?+e1? where e1? is the measurement error, educ is observed education and educ is true actual education, and cov(educ?,e1?)=0 The variance of the error term u is known to vary with the level of education.