ECN 151B UCD Eliminating Ability Bias Analysis Paper


Two approaches to eliminating ability bias in estimates of the rate of return include 1) within twin comparisons of schooling and earnings and 2) making use of variation in years of education that results from compulsory schooling laws that generate differences across individuals in their years of education (especially for high school dropouts). Briefly describe why these approaches might successfully produce an estimate that is free from ability bias.In the paper by Ashenfelter and Rouse, the authors seem to think that these approaches suggest that ability bias is not a big problem in “standard” estimates based on cross-sectional information on individuals’ wages and schooling. Why do they reach this conclusion?Can you think of any reasons that these approaches might not get rid of ability bias?

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Explanation & Answer:
250 words

approaches to eliminating ability bias

rate of return

ability bias

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