Suppose that you are interested in estimating the causal effect of X on Y; however, you are worried that your right-hand-side variable X is endogenously determined with your outcome variable Y. Further suppose that you have another variable Z that has the potential to be a good instrumental variable for X. Which of the following statements best describes how an instrument Z can be used to identify the causal effect of Xon Y? The instrument Z can serve as a proxy for the omitted variable that is causing the endogeneity problem. The instrument Z isolates the exogenous variation in X from the endogenous variation in X. O The instrument Z cannot be used to identify the casual effect of X on Y because there is no solution to the endogeneity problem. The instrument Z can act as an additional right-hand-side variable and control for the endogeneity problem.

Suppose that you are interested in estimating the causal effect of X on Y; however, you are worried that your right-hand-side variable X is endogenously determined with your outcome variable Y. Further suppose that you have another variable Z that has the potential to be a good instrumental variable for X. Which of the following statements best describes how an instrument Z can be used to identify the causal effect of Xon Y? The instrument Z can serve as a proxy for the omitted variable that is causing the endogeneity problem. The instrument Z isolates the exogenous variation in X from the endogenous variation in X. O The instrument Z cannot be used to identify the casual effect of X on Y because there is no solution to the endogeneity problem. The instrument Z can act as an additional right-hand-side variable and control for the endogeneity problem.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

See similar textbooks

Similar questions

Pisa Pizza, a seller of frozen pizza, is considering introducting a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of new pizza will be $20 million per year. While many of these sales will be to new customers, Pisa Pizza estimaes that 40% will come from customers who switch to the new, healthier pizzai nstead of buying the original version. a) Assume cusotmer will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b) Suppose that 50% of hte cusomters who will switch from Pisa Pizza's orignial pizza to its healthier pizza will switch to another brand if Pisa PIzza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?
1. Why is the existence of a correlation (existence of co-occurrence or association) between and Fnot enough evidencefor us to say that Ycauses Y?2. What is the post hoc, ergo propter hoc fallacy? Give an example
By using the concept of the Heckscher-Ohlin model, and information assumptionsbelow this i. Two factors of production, namely Labor and Landii. Two production goods, namely Cloth and Foodiii. Cloth production is labor intensiveiv. Food production is land intensivev. The rest are other HO assumptionsvi. aLC, aTC, aLF, aTF, and a*LC, a*TC, a*LF, a*TF areLabor and Land input units used for the production of eacheach Cloth and Foodvii. w is the factor price of Labor and r is the factor priceLand production a) Show that Cloth is a commodity that is labor intensive and Foodis a land intensive commodity?k) According to the Stolper-Samuelson Theorem, an increase in the relative price of outputPC/PF, how does it affecta) The relative income of the factors of production Labor and Land or w/r?b) Land/Labor Ratio? l) According to the H-O Model, a country has a comparative advantagein producing a commodity when? Give an example. m) According to Rybczynski theorem with an increase in the factor of…
Susan was frustrated. As chair of the school of nursing at the local university, she wantedher students to get used to using electronic health records. Ideally, these students wouldleave her program and be able to use their employer’s EHR system without any additionalorientation. Other campus health profession leaders had similar concerns. However, thefaculty found that within a 100-mile radius of the university, the area’s many hospitals andthree main healthcare systems all used different EHR vendors.The local healthcare systems promoted electronic health information. They were allconcerned about the safety and security of the records and the needs of their patients. Theywere also aware of the national push for system to integrate EHRs. In reality, however, therecords housed in the variety of systems could not be shared. The software was toodisconnected and dissimilar.Susan wondered what her next step should be. Which system should she adopt, ifany? How could she help move these…
Consider a random-relocation economy where each young person receives 10 units of the consumption good. There are 100 young people born each period. The total stock of money is constant and equal to $500. The consumption good can be transformed, one to one, into capital, which will give a return of x > 1 next period. Suppose a personís preferences are such that they want to consume 1/2 of their endowment when young 2 of ECON20532 and 1/2 when old. They all dislike risk. We also assume that the probability that a person is relocated is 10% (known to everybody) and the gross return on capital is 1.1. A person is notifed whether she needs to relocate or not at the end of period 1. A person who relocates can take with her money, but not capital. Individual agents cannot invest directly in capital, but there exists a (perfectly competitive) banking sector that accepts deposits from all young people. (a) What is the state contingent rate of return o§ered by banks on deposits? (b) Write…
Consider a setting in which player 1 moves first by choosing among threeactions: a, b, and c. After observing the choice of player 1, player 2 choosesamong two actions: x and y. Consider the following three variants as towhat player 3 can do and what she knows when she moves:a. If player 1 chose a, then player 3 selects among two actions: high andlow. Player 3 knows player 2’s choice when she moves. Write down theextensive form of this setting. (You can ignore payoffs.)b. If player 1 chose a, then player 3 selects among two actions: high andlow. Player 3 does not know player 2’s choice when she moves. Writedown the extensive form of this setting. (You can ignore payoffs.)c. If player 1 chose either a or b, then player 3 selects among two actions: high and low. Player 3 observes the choice of player 2, but not that of player 1. Write down the extensive form of this setting.(You can ignore payoffs.)
Assume that there are two parties, I and V. I engages in an activity that tends to injure V. V and I both can take care to reduce the expected harm from accidents. Specifically, suppose that if I takes no care (i.e., spends $0 on accident precautions), expected injury to V is $250. If I spends $40 on accident precautions, however, the expected injury to V is reduced to $175. Further suppose that V has a choice between taking no care or spending $50 in care to avoid accidents. If V spends $50 in care, V’s expected harm falls by $20 regardless of the level of care that I takes. Assume that courts adopt the socially‐optimal level of injurer care as the negligence standard. That is, if I takes less than the socially‐optimal level of care, she will be found negligent and must pay for all damages to V. If I takes at least the socially optimal level of care, she will not have to compensate V for his damages. 1. Under a negligence standard, what is I’s dominant strategy? a) I does not have a…
Suppose that the buyers do not know the quality of any particular bicycle for sale, but the sellers do knowthe quality of the bike they sell. The price at which a bike is traded is determined by demand and supply.Each buyer wants at most one bicycle.(ii) Assuming that each buyer purchases a bike only if its expected quality is higher than the price,and each seller is willing to sell their bike only if the price exceeds their valuation, what is theequilibrium outcome in this market?
Give typing answer with explanation and conclusion Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty, however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1 - p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?
When using the social ecological model, which of the following would be considered part of the "exosystem" of influence on an individual's physical activity? O Personal factors O public policy O Institutional factors O Exosystem does not exist in the social ecological model If you have a client who wants to work out on his own, which of the following method of prescribing exercise intensity you should recommend to be more accurate? O Rating of perceived exertion (RPE) O Talk test O % Age predicted HRmax O % Heart rate reserve (measured)
Consider the binary variable version of the fixed effects model with an additional regressor, D1; that is, let Yit = β0 + β1Xit + γ1D1i + γ2D2i +...+ γnDni + ui.a) Suppose that n = 3. Show that the binary regressors and the “constant” regressor areperfectly multicollinear; that is, express one of the variables D1i , D2i, D3i, and X0it as aperfect linear function of the others, where X0it = 1 for all i,t.b) Show the result in (a) for general n.c) What will happen if you try to estimate the coefficients of the regression by OLS?
The model initial setup is• The number of vacancies posted in the economy during a particular month is v = 100.• There were initially u = 225 unemployed workers at the beginning of the month.• Suppose that the average wage is 0.6 relative to their productivity. Unemployed workersreceive benefits that are half the wage, i.e., b = 0.3 relative to productivity.• Suppose that the number of matches between firms and workers are given by thefollowing matching functionsM = Au^0.5v^0.5• Suppose that 45 workers were able to find a job by the end of the month.Answer the following questions.a) What is the monthly job finding rate?b) What is the probability that an average vacancy is filled in a month?c) What is the job creation cost, k?d) What is the value of A?e) Explain how introducing a searching cost to this model would affect the queue length,the number of vacancy and unemployment rate, and wage.