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ION 2 o use the example from Question 1. each product is randomly assigned to a process by a computer program, but some products get reassigned on the factory floor (for easons). Let Z¡ denote the original assignment and X; the actual process used to produce i. In a regression of Y; on X¡ and Wi, OLSİ entially biased because W; should not be included entially biased, but an IV regression using Zj as an instrument can be used to obtain a consistent estimator iased because the products were randomly assigned in the beginning iased as long as Z¡ is also included as a control variable

ION 2 o use the example from Question 1. each product is randomly assigned to a process by a computer program, but some products get reassigned on the factory floor (for easons). Let Z¡ denote the original assignment and X; the actual process used to produce i. In a regression of Y; on X¡ and Wi, OLSİ entially biased because W; should not be included entially biased, but an IV regression using Zj as an instrument can be used to obtain a consistent estimator iased because the products were randomly assigned in the beginning iased as long as Z¡ is also included as a control variable

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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QUESTION 2 Continue to use the example from Question 1. Suppose each product is randomly assigned to a process by a computer program, but some products get reassigned on the factory floor (for practical reasons). Let Z¡ denote the original assignment and X¡ the actual process used to produce i. In a regression of Y¡ on X¡ and Wj, OLS is: d. Potentially biased because W; should not be included b. Potentially biased, but an IV regression using Z¡ as an instrument can be used to obtain a consistent estimator C. Unbiased because the products were randomly assigned in the beginning d. Unbiased as long as Zj is also included as a control variable
Transcribed Image Text:QUESTION 2 Continue to use the example from Question 1. Suppose each product is randomly assigned to a process by a computer program, but some products get reassigned on the factory floor (for practical reasons). Let Z¡ denote the original assignment and X¡ the actual process used to produce i. In a regression of Y¡ on X¡ and Wj, OLS is: d. Potentially biased because W; should not be included b. Potentially biased, but an IV regression using Z¡ as an instrument can be used to obtain a consistent estimator C. Unbiased because the products were randomly assigned in the beginning d. Unbiased as long as Zj is also included as a control variable
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