Selection bias is a problem when trying to estimate the return to education in a standard human capital model. In this context, what does selection bias refer to?

Question

Quizplus · Accepted Answer

Selection bias in this context refers to the fact that workers self-select their education levels and jobs based on their abilities and preferences, which makes it difficult to estimate the true causal effect of education on wages. This leads to a potential bias in the estimated return to education in a standard human capital model.

Selection Bias Is a Problem When Trying to Estimate the Return