Consider the following results: where WÌ t , PÌ t , MÌ t , and XÌ t
Question:
where WÌt , PÌt , MÌt , and XÌt are percentage changes in earnings, prices, import prices, and labor productivity (all percentage changes are over the previous year), respectively, and where Vt represents unfilled job vacancies (percentage of total number of employees).
Since the OLS and 2SLS results are practically identical, 2SLS is meaningless. Comment.
Transcribed Image Text:
R² = 0.924 |OLS: W, = 0.276 + 0.258P, + 0.046P,-1 +4.959V, OLS: P, = 2.693 + 0.232 W, – 0.544X, +0.247M, + 0.064.M,–1 R² = 0.982 2SLS: W, = 0.272 + 0.257P, + 0.046Þ,–1 +4.966V, 2SLS: P, = 2.686 + 0.233W, – 0.544X, +0.246M, + 0.046 M,–1 R² = 0.981 R² = 0.920
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If the value of the R 2 in the first stage of 2SLS is high it means that the estimated values ...View the full answer
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