Question

Asked Nov 4, 2019

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In which of the following cases OLS estimation of Healthcare=a+bAge+u will be biased?

a) Only include in your estimation sample individuals whose health care spending is more than 500 per year.

b) Use a random sample.

c) Healthcare is recorded with some random typing errors.

d) The error variance is larger at an older age.

Step 1

To identify the case in which the OLS estimation of Healthcare=a+bAge+u will be biased

Step 2

OLS method is used to find the unknown parameters in the linear regression model. In the Ordinary Least Square (OLS) method, the focus is on finding a model that fits closely to the whole population and not restrict itself to some particular...

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