Econometrics Thomas Eisensee and David Stromberg wanted to measure how much news coverage of a foreign disaster impacted the amount of disaster relief provided by the U.S. government. They argue that the simple relationship would be biased. Let X = Minutes of News Coverage and Y= Disaster Aid. Choose a variable X2 that could bias the simple relationship. This variable should impact the amount of coverage and impact the amount of aid for reasons other than purely news coverage. Eisensee and Stromberg introduce an instrument Z = During the Olympics. Explain how Z could satisfy the relevant and exogenous criteria. Explain how you could use Z to estimate the impact of X on Y free from X2 bias. Hint: you should mention two stages.

The basis of any economic or econometric model is to design an accurate predictor of real-life…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 1.4CE

See similar textbooks

Econometrics

Thomas Eisensee and David Stromberg wanted to measure how much news coverage of a foreign disaster impacted the amount of disaster relief provided by the U.S. government. They argue that the simple relationship would be biased.

Let X = Minutes of News Coverage and Y= Disaster Aid. Choose a variable X2 that could bias the simple relationship. This variable should impact the amount of coverage and impact the amount of aid for reasons other than purely news coverage.

Eisensee and Stromberg introduce an instrument Z = During the Olympics. Explain how Z could satisfy the relevant and exogenous criteria.

Explain how you could use Z to estimate the impact of X on Y free from X2 bias. Hint: you should mention two stages.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions