Business, 05.05.2020 06:19 JonJon05

In a regression explaining wages with the number of years of education (wage = β0 + β1educ+u), it is likely that people with more education have a wider variety of interests and job opportunities, which would lead to more wage variability at higher levels of education. People with very low levels of education have fewer opportunities and often must work at the minimum wage; this serves to reduce the wage variability at low education levels. What is the name of this problem in econometrics? How do we deal with it?

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In a regression explaining wages with the number of years of education (wage = β0 + β1educ+u), it is...