Documente Academic
Documente Profesional
Documente Cultură
Fall 2016
1) (21 points) Suppose we have the following population equation in vector as y = x + u where x is a
1K vector of regressors and =(1,2,...,K) is a K1 vector. (Here x1 = 1.) We obtain a sample of
size N from the population to estimate . Thus,{(xi,yi) : i = 1,2,...,N} are independent, identically
distributed random variables, where xi is 1K and yi is a scalar. For each observation i, we have yi
=xi + ui. (YOU NEED TO BE CAREFUL ABOUT THE DETAILS IN THIS QUESTION!)
a) Derive the OLS estimator (by taking expectations). What assumptions do you make?
b) Show that the OLS estimator is consistent for .
5) (7 points)
a)
b)
Let Yi denote the outcome of interest (e.g. health status) and Di = {0,1} the treatment variable
(e.g. hospital visit). Can we find the causal eect of a hospital visit on health by calculating E(Yi |
Di=1) - E(Yi | Di=0) ? Show the selection bias.
c)
6) (8 points) Suppose that you want to estimate the returns to schooling using data on 1,000 twins.
The data include information on twins wages and years of schooling, as well as other background
variables like parental characteristics and such. We assume that twin pairs have the same level of
ability. How could we use panel data estimation methods to estimate the returns to schooling with
this data.
7) (13 points) Suppose that you want to conduct a study measuring the effect of Syrian immigrants
on the Turkish labor market.
a)
Design and explain a difference-in-differences methodology to measure this effect. Explain the
data you would use. What are your control and treatment grups? Write down the regression
specification you would use, clearly defining each variable.
b)
Discuss the identification assumptions in this study? Do you have a good control group? Would
Would you be able to add other control variables to this regression? What are the advantages
of it?
8) (8 points) Suppose that you want to estimate the effect of number of children on female labor force
participation rate. Would you get consistent estimates if you run an OLS? What is the problem?
Suppose that in Turkey parents whose first child is a girl are more likely to have a second child.
Would this help you in solving this problem? How? Under what assumptions? Would these
assumptions hold in this case?
b)
Suppose that in the following regression, ui includes ability variable which is positively correlated with
c)
In the case of a sample correlation coefficient of .95 between two independent variables both included
in the model, OLS t statistics are invalid.
d)
and find a negative and statistically significant 1.Then, we must have made a mistake in the regression.
f)
Suppose that E (u|x) = 0 holds. We take a sample of 1,000 and run the following regression:
y = 0 + 1x1 + 2x2 + u
Our estimate of 1 = 0.52 whereas the true 1 = 0.5. Then, we must have made a mistake in the estimation.
g)
Suppose we regress the price of a house (price) on its square footage (sqrft) and number of
bedrooms(bdrms) and get the following results using a sample of 123 houses. The negative sign of bdrms
show that there is something wrong in the regression.
log(price) = 7.46
(1.15) (.18)
(.04)