QUESTION 4In order to estimate the effect on wage of years of schooling, researcher B analysed the dataset that researcher Acollected in Question 3. Researcher B considers the following regression equationlog (income); = Bo+B₁educ; +• + Uiwhere educ; is years of schooling for individual and includes additional terms associated with other characteristicsin the dataset. When research B was carefully examining omitted factors in the error term U¡, she realised thatunobserved factors such as motivation, and work ethic; would determine the income level and be correlatedwith the variable of interest, educ¡. If researcher B's conjecture regarding the unobserved factors is correct, then:Hint: see page 1 to page 13 of Lecture Note 4.a.The OLS estimator B₁ would not be computed.b.The OLS estimator B₁ would be biased.C.The OLS estimator B₁ would suffer imperfect multicollinearity.d.The OLS estimator B₁ would have a large standard error.

OLS stands for "Ordinary Least Squares," which is a widely used method for estimating the parameters…

QUESTION 4 In order to estimate the effect on wage of years of schooling, researcher B analysed the dataset that researcher A collected in Question 3. Researcher B considers the following regression equation log (income), =Bo+B₁educ; + www + Ui where educ; is years of schooling for individual i and includes additional terms associated with other characteristics in the dataset. When research B was carefully examining omitted factors in the error term U₁, she realised that unobserved factors such as motivation, and work ethic; would determine the income level and be correlated with the variable of interest, educ;. If researcher B's conjecture regarding the unobserved factors is correct, then: Hint: see page 1 to page 13 of Lecture Note 4. a. The OLS estimator B₁ would not be computed. b. The OLS estimator B₁ would be biased. The OLS estimator B₁ would suffer imperfect multicollinearity. d. The OLS estimator B₁ would have a large standard error.

QUESTION 4 In order to estimate the effect on wage of years of schooling, researcher B analysed the dataset that researcher A collected in Question 3. Researcher B considers the following regression equation log (income), =Bo+B₁educ; + www + Ui where educ; is years of schooling for individual i and includes additional terms associated with other characteristics in the dataset. When research B was carefully examining omitted factors in the error term U₁, she realised that unobserved factors such as motivation, and work ethic; would determine the income level and be correlated with the variable of interest, educ;. If researcher B's conjecture regarding the unobserved factors is correct, then: Hint: see page 1 to page 13 of Lecture Note 4. a. The OLS estimator B₁ would not be computed. b. The OLS estimator B₁ would be biased. The OLS estimator B₁ would suffer imperfect multicollinearity. d. The OLS estimator B₁ would have a large standard error.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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