We are interested in measuring the returns to an extra year of experience on wages. Consider the following wage equation:
= 0 + 1edu + 2exper + 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.