You are interested in estimating the effect of health infrastructure on output per capita, and would...

 

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You are interested in estimating the effect of health infrastructure on output per capita, and would like to know if this accounts for cross-country variation in Y/L. Suppose that you only have data on the number of hospital beds per capita as a measure of health infrastructure in different countries. List 2 main reasons why running a regression of Y₁/L; on this measure could give biased estimates. What is the likely direction of the bias? (Provide a short explanation.) You are interested in estimating the effect of health infrastructure on output per capita, and would like to know if this accounts for cross-country variation in Y/L. Suppose that you only have data on the number of hospital beds per capita as a measure of health infrastructure in different countries. List 2 main reasons why running a regression of Y₁/L; on this measure could give biased estimates. What is the likely direction of the bias? (Provide a short explanation.)

Answer rating: 100% (QA)

1 Endogeneity The number of hospital beds per capita could be endogenous to the level of output per capita This means that richer countries may be abl... View the full answer