Question: Please help me with solving questions (a) and ( b) . Provide the steps to get to the final solution. THANKS a lot! Consider the

Please help me with solving questions (a) and (b). Provide the steps to get to the final solution. THANKS a lot!

Please help me with solving questions (a) and (b). Provide the steps

Consider the linear model yi =13IJ +31% +311 where 3; stands for an individual's income, a: for working hours and u is an error term. In addition, we know that it includes an unobservable characteristic that is correlated with working hours. Let 's call it a taste for work. More precisely, we can say that \"Hi = 510i + 3i: where it: stands for taste for work. Assume that E(e,|:r.) = 0 and E(e | Ii} = crz. (a) Derive the DIS estimator for ,81. (b) Write the expression for the bias 13(31): = Eng!) ,3]. What does it depend on

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