Continue with Exercise 13.2 but assume that it is model (2) that is the truth. Discuss the consequences of fitting the mis-specified model (1).

In exercise 13.2

Suppose that the true model is

Y_i = β₁ X_i + u_i ……………… (1)

but instead of fitting this regression through the origin you routinely fit the usual intercept present model:

Y_i = α₀ + α₁X_i + v_i ………………. (2)

Assess the consequences of this specification error.