Question: Use the data set WAGE2 for this exercise. (i) Use the variable KWW (the knowledge of the world of work test score) as a proxy

Use the data set WAGE2 for this exercise.

(i) Use the variable KWW (the “knowledge of the world of work” test score) as a proxy for ability in place of IQ in Example 9.3. What is the estimated return to education in this case?

(ii) Now, use IQ and KWW together as proxy variables. What happens to the estimated return to education?

(iii) In part (ii), are IQ and KWW individually significant? Are they jointly significant?

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