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Topic: Role models in education (Read 1019 times) |
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wonderful
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Role models in education
« on: Jul 2nd, 2013, 10:57pm » |
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There are two types of individuals: L and H. Each individual make schooling decision. Yet, she has imperfect information about the return to education. (RTE)
Considering an individual Laura. Her prior on RTE follows a normal distribution N(mu, sigma).
The government also has some information with noise on RTE. Specifically, it knows RTE follows a normal distribution N(mu_g, sigma_g).
a. Suppose, the government lets Laura knows what it knows about RET. What would be the posterior perception of Laura on RET?
b. After presenting Laura with the information on RET as in part a, the government send Andy who play a role model, someone who has a higher RET than the average. Andy would tell Laura that he belongs to type L. Assume that Laura also belongs to type L. How do you think Laura will update her perception on RET?
Part b has some practical policy implications, so feel free to share your thoughts.
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