Question: (Continues question 12.) Let c, d, e be real numbers and let Wi = cXi + di + ei. Dick elects to run a regression
(Continues question 12.) Let
c, d, e be real numbers and let Wi =
cXi + dδi + ei. Dick elects to run a regression of Yi on Xi and Wi, again without an intercept. Dick will use the coefficient of Xi in his regression to estimate
a. If e = 0, Dick still gets
a, up to random error—as long as d = 0. Why? And what’s wrong with d = 0?
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