ECO 4005 UOT Regression and statistics Questions
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2. Explain the following concepts: (2 marks each) a. Omitted variable bias b. Multicollinearity c. Autocorrelation d. Unbiasedness e. Mis-specification of the model 3. A linear multiple regression model is given as: Y = ?o + ?1 X1 + ?2 X2 + ? a. Determine the parameters of this model (3 marks)b. Explain the circumstance under which X1 be called an endogenous variable? (3 marks)11.The relationship between earnings and education is shown in the following regression: Earnings = 5.23 + 0.065 Educ + 0.08 Experience s.e. (2.14) (0.009) (0.03) a. Construct a 95% confidence interval for the effect of years of education on earnings. b. How would 15 years of related experience impact 2 additional years of earnings? c. Assume that persons working with this company have different abilities, but this was not taken into consideration in the above regression. If you have to include abilities as a new variable, what would be the new regression function? d. What should be the theoretical sign of ?3? e. If the variable, ability, is included in the new regression function, would the size of the estimated value of ?o (the constant) be greater than or less than its size in the regression without the variable ability? Explain
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endogenous variable
Regression and statistics
parameters
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