2. (15 points) Consider the wage equation wage = Bo + Bieduc + u, u =...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
2. (15 points) Consider the wage equation wage = Bo + Bieduc + u, u = educ. e where e is a random variable with E(e) Denote the OLS estimator of B to be 3. = 0 and Var(e) = o. Assume that e is independent of educ. (a) Discuss whether the zero conditional mean assumption (Assumption SLR.4) is satisfied, and whether is unbiased. (b) Discuss whether the homoskedasticity assumption (Assumption SLR.5) is satisfied. (c) Now, we transform model so that the regression error displays homoskedasticity: wage educ = 1 1 educ 1 educ + B + (2) U educ + B +e. (3) Denote the corresponding OLS estimator of to be 3. Show that B is an unbiased estimator for . Given a random sample, will the estimate have the same value as the estimate B? 2. (15 points) Consider the wage equation wage = Bo + Bieduc + u, u = educ. e where e is a random variable with E(e) Denote the OLS estimator of B to be 3. = 0 and Var(e) = o. Assume that e is independent of educ. (a) Discuss whether the zero conditional mean assumption (Assumption SLR.4) is satisfied, and whether is unbiased. (b) Discuss whether the homoskedasticity assumption (Assumption SLR.5) is satisfied. (c) Now, we transform model so that the regression error displays homoskedasticity: wage educ = 1 1 educ 1 educ + B + (2) U educ + B +e. (3) Denote the corresponding OLS estimator of to be 3. Show that B is an unbiased estimator for . Given a random sample, will the estimate have the same value as the estimate B?
Expert Answer:
Answer rating: 100% (QA)
a In order to determine if the zero conditional mean assumption Assumption SLR4 is satisfied we need ... View the full answer
Related Book For
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
Posted Date:
Students also viewed these economics questions
-
can someone solve this Modern workstations typically have memory systems that incorporate two or three levels of caching. Explain why they are designed like this. [4 marks] In order to investigate...
-
PLEASE GIVE CORRECT ANSWERS Prove that the number of comparators in any sorting network is (n log n). [4 marks] (ii) What does Part (d)(i) imply in terms of the depth of any sorting network? [1 mark]...
-
What is the result of the following? A. [Natural History, Science] B. [Natural History, Science, Art] C. The code does not compile. D. The code compiles but throws an exception at runtime. } import...
-
Give the change in internal energy of a system if (a) W = 50 J, Q = 50 J; (b) W = -50 J, Q = -50 J; (c) W = 50 J, Q = -50 J.
-
Annual purchasing salaries are $65,000, operating expenses for the purchasing department are $25,000, and inspecting and receiving costs are $25 per order. If the purchasing department places 9000...
-
A shaft is subjected to (a) axial load only (b) bending loads only (c) torsional loads only (d) all of the above
-
Investment Turnover Krall Company recently had a computer malfunction and lost a portion of its accounting records. The company has reconstructed some of its financial performance measurements...
-
A heat engine operating between 62.343 o C and 684.496 o C has an efficiency 65.725 % of that of a Carnot engine operating between the same temperatures. If the engine absorbs heat at a rate of 67.91...
-
Consider the differential equation dy dy +7 +12y = 36x, dx dx Given that the complementary function is y(x) = Ae-3x +Be -4x x > 0. find a particular integral and describe the behaviour of the...
-
What is the primary function of the pancreas?
-
Dunbar Company had 4 , 0 0 0 , 0 0 0 shares of $ 1 par value common stock outstanding at January 1 , 2 0 2 0 . On July 1 , 2 0 2 0 , the company issued 1 , 0 0 0 , 0 0 0 additional shares of common...
-
Xavier, the owner of The Fabric Corner, lent $15,000 to Dani to open her own card shop. Dani plans to repay Xavier at the end of seven years with 8% interest compounded quarterly. How much will...
-
Find the length of the arc of the curve = costi + e' sintj+e'k from 01
-
write basic source code for a online bank balance checker using the folowing code? The Online Bank The Online Bank
-
Why is Return On Investment (ROI) a major consideration in the adoption of RGID technology? Why would Barcodes or RFID reduce labour costs in transportation? What is the impact of non-standardisation...
-
You are interested in investing and are considering a portfolio comprised of the following two stocks. Their estimated returns under varying market conditions are provided: (note: it is difficult to...
-
Let us modify Computer Exercise C8.4 by using voting outcomes in 1990 for incumbents who were elected in 1988. Candidate A was elected in 1988 and was seeking reelection in 1990; voteA90 is Candidate...
-
In Example 8.7, we computed the OLS and a set of WLS estimates in a cigarette demand equation. (i) Obtain the OLS estimates in equation (8.35). (ii) Obtain the h. used in the WLS estimation of...
-
Let {yt} be an 1(1) sequence. Suppose that n is the one-step-ahead forecast of yn+1 and let fn = n + yn be the one-step-ahead forecast of yn+1. Explain why the forecast errors for forecasting yn+1...
-
What percentage of the 9,449 survey respondents live in the Eastern part of the county?
-
(a) What percentage of those not completing high school were females? (b) What percentage of those not completing high school were males? (c) What percentage of those completing high school were...
-
Which county region has the largest percentage of respondents?
Study smarter with the SolutionInn App