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What is Econometrics?
Earnings 0 1education u
Economics 20 - Prof.
Example: (continued)
The estimate of 1, is the return to
education, but can it be considered causal?
While the error term, u, includes other
factors affecting earnings, want to control
for as much as possible
Some things are still unobserved, which
can be problematic
Economics 20 - Prof.