Question: Use the data in OPENNESS.RAW for this exercise. (i) Because log(pcinc) is insignificant in both (16.22) and the reduced form for open, drop it from

Use the data in OPENNESS.RAW for this exercise.
(i) Because log(pcinc) is insignificant in both (16.22) and the reduced form for open, drop it from the analysis. Estimate (16.22) by OLS and IV without log(pcinc). Do any important conclusions change?
(ii) Still leaving log(pcinc) out of the analysis, is land or log(land) a better instrument for open?
(iii) Now, return to (16.22). Add the dummy variable oil to the equation and treat it as exogenous. Estimate the equation by IV. Does being an oil producer have a ceteris paribus effect on inflation?

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1 11 The OLS estimates are The IV estimates are inf 2523 410 n 114 R 045 inf 2961 566 n 114 R 032 21... View full answer

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