Choose best answer and briefly explain your reasoning 7. Suppose a researcher is

Question

Choose best answer and briefly explain your reasoning

7. Suppose a researcher is interested in the impact of on-the-job training on productivity, and plans to estimate the following model: prod = + , training + ,age + u , where prod is a measure of labor productivity, and training represents number of hours a worker has spent in a training program, and age represents age in years. The researcher believes that more motivated workers tend to participate in training. If this is true, then OLS estimation of this model will most likely to lead to a. biased estimate of , and A, . b. biased estimate of B only c, biased estimate of 2 only. d. unbiased estimate of , and

Explanation / Answer

b> is the correct answer

Reason

More motivated workers who produce more do spend more time on training, so there will be a high correlation between them but it is not a causal relation, thus the estimate will be biased.

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