1. Regression modeling and interpretation of results. Jacob Mincer (1958) "Investment in Human Capital and Personal Income Distribution", JPE 66, 281-302 spells a model of education as an investment, where human capital H equals H = AeBeduc where educ is educational attainment, 3 is the return to an investment of the annual earnings amount (that gives you an extra year of education, and so increases human capital), and A includes all other factors influencing human capital. If one unit of H can be rented by a firm at price P, a person with capital H gets wage H x P: log (wage) = log P + Beduc + log A. Using the data on workers' wages, education, experience, etc. from the Stata file wage1.dta (taken from the 1976 Current Population Survey), run a regression of the logarithm of wage on the education and tenure. Interpret and critically assess your results. Pay attention to possible biases.

Fig: 1