Statistics and Probability

You are interested in studying what causes political corruption. You think that an important part of the explanation may be related to the amount of foreign aid a country receives. After developing your theory you test your hypotheses using the following model:

Corruption = 0 + 1Aid + iControls + u

where Corruption indicates the level of political corruption in a given country,

Aid is the total amount of Foreign Aid received by such country

and parameter i refers to a vector of relevant controls variables.

Write a short essay ( 500 words max) addressing the following questions:

1. Should you be cautious about the coefficient of Aid in your model? Why yes or why not?

2. Can your model be improved? If so, propose and develop an empirical solution making sure that you provide sufficient justification to support your strategy.

Please send me answer ASAP.