The returns to schooling may not be linear in years of education. For example, increasing years of schooling from 12 years to 13 years, high school diploma to some college, would be different from increasing it from 15 years to 16 years, some college to bachelor's degree. Therefore, it may be more useful to estimate the effect on earnings of education by using the highest diploma/degree rather than years of schooling. Define four dummy variables to indicate educational achievements

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When estimating the effect of education on earnings using dummy variables to represent educational a... View the full answer