We are interested in measuring the returns to an extra year of experience on wages. Consider the following wage equation:

𝑤𝑎𝑔𝑒 = 𝛽0 + 𝛽1edu + 𝛽2exper + u (1)

Where wage is hourly wage in pounds, edu is year of education, exper is years of work experience, and u is the unobservable. We estimate the model with a sample of 950 employees, aged 25 – 45, who are living and working in the U.K.

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