Title 6.5. Causal Diagram Example.pdf ✅

pacmann.io © 2022 – Pacmann AI 62 Causal Diagram: Education and Earning
pacmann.io © 2022 – Pacmann AI 63 Effect of College Education on Earnings ● Let’s now move to another example ● A classical question in labor economics is whether college education increases earnings.
pacmann.io © 2022 – Pacmann AI 64 ● According to the Becker human capital model (Becker 1994), Education increases one’s marginal product, and since workers are paid their marginal product in competitive markets, education also increases their earnings. ● Let’s try to represent that model in causal diagram. image source Effect of College Education on Earnings
pacmann.io © 2022 – Pacmann AI 65 Variables of interest ● Research Question : What is the causal effect of an additional year of education on earnings? ● Two main variables of interest: ○ Education [we call this the “treatment” or “exposure” variable] ○ Earnings [the “outcome”]