Title 5.3 Data Generating Process (cont.).pdf ✅

pacmann.io © 2022 – Pacmann AI 25 Data Generating Process: Example (cont.)
pacmann.io © 2022 – Pacmann AI 26 ● Next, focus on college students to isolate the effect of brown hair on income. ● Table displays the mean income by hair color among college students. Isolate Effect Hair Log Income Brown 5.330 Other Color 5.201 Ib = income of brown hair Io = income of other color
pacmann.io © 2022 – Pacmann AI 27 ● Among college students, the income of brown-haired individuals is 13% higher than other colored students. ● By considering the DGP, we obtained a closer estimate to the known 10% income boost for brown hair. Isolate Effect Hair Log Income Brown 5.330 Other Color 5.201
pacmann.io © 2022 – Pacmann AI 28 ● From the brown hair-income example, we know that DGPs have two parts: known and unknown. Data Generating Process The Known: ● Only non-college people dye their hair. ● Income related to College Degree The Unknown: The Effect of being brown-haired on Income