Question: Suppose data are generated by where E [ u | educ ] = 0 . wagei = beta 0 + beta 1 educi

Suppose data are generated by where E[u | educ]=0.
wagei =\beta 0+\beta 1educi + ui,
(i) Provide an expression for E[wage | educ] that references \beta 0 and \beta 1. Potential Solution: E[wage | educ]=\beta 0+\beta 1educ.
(ii) Suppose an analyst has data from workers with 9 years of education and with 11 years of educa-
tion. The analyst calculates the average wage for each group, finding E[wage | educ =9]=14 and
E[wage | educ =11]=16. Using these estimates, provide an estimate of \beta 1.

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