Consider the following regression equation specied for 2-period panel data: where i = 1; 2; :::N and t = 1; 2. If you expect that β_1 is positive, but the correlation between Δx_i and Δu_i is negative, then what is the bias in the OLS estimator of β_1 in the first-differenced equation?

Consider the following regression equation specied for 2-period panel data: where i = 1; 2; :::N and t = 1; 2. If you expect that β_1 is positive, but the correlation between Δx_i and Δu_i is negative, then what is the bias in the OLS estimator of β_1 in the first-differenced equation?

Algebra: Structure And Method, Book 1

(REV)00th Edition

ISBN:9780395977224

Author:Richard G. Brown, Mary P. Dolciani, Robert H. Sorgenfrey, William L. Cole

Publisher:Richard G. Brown, Mary P. Dolciani, Robert H. Sorgenfrey, William L. Cole

Chapter2: Working With Real Numbers

Section2.9: Dividing Real Numbers

Problem 8MRE

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Question

Consider the following regression equation specied for 2-period panel data:

where i = 1; 2; :::N and t = 1; 2. If you expect that β_1 is positive, but the correlation between Δx_i and Δu_i is negative, then
what is the bias in the OLS estimator of β_1 in the first-differenced equation?

Definition Definition Relationship between two independent variables. A correlation tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.

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