Wage = $, per hour; Occup = Occupation; Sector = 1 for manufacturing, 2 for construction, 0 for other; Union = 1 if union member, 0 otherwise; Education = years of schooling; Experience = work experience in years; Age = in years; Sex = 1 for female; Marital status = 1 if married; Race = 1 for other, 2 for Hispanic, 3 for white; Region = 1 if lives in the South.
Consider the following simple wage determination model:
In W = B1 + B2Educ + B3Exper + B4Exper2 + ui (1)
Suppose education, like wages, is endogenous. How would you find out that in Equation (1) education is in fact endogenous? Use the data given in the table in your analysis.