Answered: Review the Stata do-file written below…

Database System Concepts

7th Edition

ISBN:9780078022159

Author:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan

Publisher:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan

Chapter1: Introduction

Section: Chapter Questions

Problem 1PE

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Review the Stata do-file written below thatsimulates the omitted variable bias. 1. Discuss the step-by-step procedure for the OVB simulation as written in the Stata do-file. In the regression of Y on T. is the estimated coefficient for T biased? why? 2. Does adding variable S on the regression of Y on T change the estimated coefficient T? why? 3.Reproduce the empirical density figure and explain your finding. * ============================================================================== * * Title : OLS simulation: ommitted variable bias (OVB) * Authors : Gumilang Aryo Sahadewo * Stata version : 12 * Date created : December 4th 2017 * Last modified : December 7th 2017 * * ============================================================================== ** INITIALIZATION version 12 set more off clear all cap log close // use this command if you are used to using log files ** SET NUMBER OF OBSERVATIONS set obs 1000 ** PART A: MULTIPLE LINEAR REGRESSION // generate a random explanatory variable gen T = 5*runiform() gen S = 10*runiform() // the variable v is correlated with t gen V = 5*runiform() + 0.8*T // generate random error gen U = rnormal() // simulate y gen Y = 5 + 10*T + 4*S + 8*V + 5*U // Create random sample gen sample = runiform() sort sample // regress the full model eststo clear // are the estimated coefficients biased? eststo m3: reg Y T S V // suppose that you don't observe the variable v // unobsevable variables are something you encounter many times in econometrics // what would be the consequence of ommitting an important variable? eststo m1: reg Y T // is the estimated coefficient: // 1. underestimated? // 2. overestimated? // does adding variable s help? eststo m2: reg Y T S // set the directory for your tables global path /// set your directory below "/Users/gasahadewo/Documents/STATA/Lecture/2020_microeconometrics" cd "$path/table" // change the directory // into word esttab m1 m2 m3 using ovb.rtf, b(a3) se nonumbers nonotes /// mtitles("model 1" "model 2" "model 3") /// scalars("N Obs" "r2 R-sq" "r2_a Adj. R-sq") /// star(+ 0.10 * 0.05 ** 0.01) label /// replace // or into LaTex esttab m1 m2 m3 using ovb, b(a3) se nonumbers nonotes /// mtitles("model 1" "model 2" "model 3") /// scalars("N Obs" "r2 R-sq" "r2_a Adj. R-sq") /// star(+ 0.10 * 0.05 ** 0.01) label /// replace booktabs // finite sample estimation global ssize 100 // set the directory for your figures cd "$path/figure" // change the directory preserve gen b1_hat = . gen b1_true = . foreach i of numlist 1/100 { // generate random numbers qui gen rand`i' = runiform() sort rand`i' // regress using 30 randomly chosen sample qui reg Y T if _n

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