Question

Suppose we have two individuals in the population, A and B, and both have the possibility of being college graduates or high-school graduates. Suppose, A would have earned £12 an hour as a high-school graduate and £24 an hour as a college graduate. However, B would have earned £8 an hour as a high-school graduate, and £14 an hour as a college graduate. What is the average causal (treatment) effect of college education?

1. 9
2. 6
3. 12
4. 19

Answer 1

The average causal effect of college education on wages for individuals A and B is £9 per hour.

Step-by-step explanation:

The question is about calculating the average causal (treatment) effect of college education on hourly wages for two individuals, A and B. To find the average effect, we calculate the hourly wage increase for each individual due to college education and then find the average of these increases. For individual A, the wage increase is £24 - £12 = £12. For individual B, the increase is £14 - £8 = £6. The average causal effect is therefore (£12 + £6) / 2 = £9 per hour.