Question: You are trying to learn whether a training program leads to higher post training wage rates. You compare the average wage rates for workers who

You are trying to learn whether a training program leads to higher post training wage rates. You compare the average wage rates for workers who went to training to the average wage rates for workers who did not go to training. Suppose that the workers with the worst skills are those who went to training, and that better skills lead to higher wage rates. Will the comparison above accurately give the impact of training? Why or why not? If the answer is "not" will that comparison over- or under-estimate the effect of going to training, and why? If you find that the workers who went to training have lower wage rates on average, does that imply that the training hurts workers? Why or why not? [Hint: think of the comparison between the simple regression which only has training on the RHS and the multiple regression which has training and skill on the RHS. Now use the relationship between the simple and multiple regression coefficients from the handout to answer the question.]

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To tackle this question we need to understand the impact of worker skills on wage rates and how the methodology of comparison affects the results Here were interested in determining whether a training ... View full answer

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