Consider the following regression model: Fram Risk Score; = Bo + B1 × Health Insurance; + u¿ The Framingham Risk Score predicts 10-year risk of cardiovascular disease based on age, cholesterol levels, blood pressure, blood sugar, use of medication for high blood pressure, and smoking. A higher score means worse overall cardiovascular health. A researcher who collects data and regresses the Fram Risk Score against Health Insurance (= 1 if have insurance) finds that B1< 0. The OLS estimator, B1, however, likely suffers from omitted variable bias because those who have health insurance, on average, tend to be more prudent than those who do not have health insurance. Because of this omitted variable bias, it is likely the case that ß1_B1.

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1.
Consider the following regression model:
Fram Risk Score; = Bo + B1 × Health Insurance; + u¿
The Framingham Risk Score predicts 10-year risk of cardiovascular disease based on age,
cholesterol levels, blood pressure, blood sugar, use of medication for high blood pressure, and
smoking. A higher score means worse overall cardiovascular health. A researcher who collects
data and regresses the Fram Risk Score against Health Insurance (= 1 if have insurance) finds
that B,< 0.
The OLS estimator, B, , however, likely suffers from omitted variable bias because those who
have health insurance, on average, tend to be more prudent than those who do not have health
insurance. Because of this omitted variable bias, it is likely the case that B1 B1.
A)
В)
>
2.
Consider the following regression model:
Class Average; = Bo + B1 x Office Hours; + u;
Class Average is the students' average grade in the class at the end of the term and Office Hours
is the number of office hours held by the instructor over the entire term.
A researcher who collects data and regresses Class Average against Office Hours finds that,
surprisingly, B< 0.
The OLS estimator, B1 , however, likely suffers from omitted variable bias because instructors
who teach large introductory courses with many non-major enrollees, in which grades are
relatively low, might hold more office hours than instructors who teach small upper level
courses with few non-major enrollees, in which grades are relatively high. Because of this
omitted variable bias, it is likely the case that ß1_B1.
A)
B)
<
>
V A
V A
Transcribed Image Text:1. Consider the following regression model: Fram Risk Score; = Bo + B1 × Health Insurance; + u¿ The Framingham Risk Score predicts 10-year risk of cardiovascular disease based on age, cholesterol levels, blood pressure, blood sugar, use of medication for high blood pressure, and smoking. A higher score means worse overall cardiovascular health. A researcher who collects data and regresses the Fram Risk Score against Health Insurance (= 1 if have insurance) finds that B,< 0. The OLS estimator, B, , however, likely suffers from omitted variable bias because those who have health insurance, on average, tend to be more prudent than those who do not have health insurance. Because of this omitted variable bias, it is likely the case that B1 B1. A) В) > 2. Consider the following regression model: Class Average; = Bo + B1 x Office Hours; + u; Class Average is the students' average grade in the class at the end of the term and Office Hours is the number of office hours held by the instructor over the entire term. A researcher who collects data and regresses Class Average against Office Hours finds that, surprisingly, B< 0. The OLS estimator, B1 , however, likely suffers from omitted variable bias because instructors who teach large introductory courses with many non-major enrollees, in which grades are relatively low, might hold more office hours than instructors who teach small upper level courses with few non-major enrollees, in which grades are relatively high. Because of this omitted variable bias, it is likely the case that ß1_B1. A) B) < > V A V A
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