You are interested in the effect of income on health, where a linear regression will lead to classical selection bias. One option is to use the income of the neighborhood as an instrument of an individual’s income. Is this a good instrument? Explain.
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- Correlation between X and Y can only be interpreted as a causal relationship of X and Y if: Select one: a. Y is unaffected by any variable that is correlated with X b. Y is an affected by any variable other than X c. Both A and B d. Y is unaffected by X in a linear wayYou and your research partner want to use Instrumental Variable analysis to write an econometrics paper and find causal estimates. Your partner argues that because the residuals and the instrument are uncorrelated, the exogeneity requirement is satisfied. What do you tell your research partner: a) You agree, the exogeneity requirement is satisfied by construction b) You agree, the exogeneity requirement is satisfied by their demonstration c) You disagree, you would need the results of the White Test to make this conclusion d) You disagree, the exogeneity requirement cannot be tested as we do not observe the error terms e) You cannot make any conclusions with the current informationIndicate whether the statement is true or false, and justify your answer.The Rothschild–Stiglitz model predicts that people who own life insurance should have fewer unobserved traits (that is, unobserved by insurance companies) that lead to a higher risk of death when compared against people with the same level of income but who do not own life insurance.
- A teacher observes that the mitterm grades of students in the class varies depending on “the number of classes that the student takes”, “the difficulty of the assignments”, and the “stress experienced by the student”. She assigns to you the task of doing a research project on this and wants you to do the following: a. Give the project a suitable title b. What is the research question? c. Clearly label the variables (dependent and independent) d. Develop three hypothesesWhat are the shortcomings of the grossman modelIn some circumstances, individuals reproduce better when the population size is large, and fail to reproduce when the population size is small (the Allee effect introduced in Exercise 46). Suppose that per capita production is an increasing linear function with λ(0) =−2 and a slope of 0.01. Find λ(b) and the differential equation for b. Is b(t) increasing when b = 100? Is b(t) increasing when b = 300?
- The idea that standard economic model is a good predictor of behavior if people have sufficient time to learn is the __________preference hypothesis.Which of the following is NOT a characteristic of a typical positive economic model? Group of answer choices the assumption that people weigh the costs and benefits of their various alternatives realistic assumptions makes predictions that can be proven false makes assumptions that ignore the complexity of behavior A regression estimates that Q = 35 - 0.1 ∗ X, where Q is the quit rate, X is the number of employees at the firm. This indicates that doubling the number of employees from 100 to 200 will reduce the quit rate by Group of answer choices 35% points. 50% points. 5% points. 10% points. Because workers have varying preferences about the type of work they like to do, Group of answer choices the firm supply curve for chefs is vertical. the market supply curve for chefs is upward sloping. the market demand curve for chefs is downward sloping. the firm supply curve for chefs is horizontal. Year Average Nominal Wage…How do economists use regression as a matchmaker to simulate an RCT?
- In the Two Period Consumer model, the Effect from a decrease in current income is: Group of answer choices C1↑; C2↑; Savings ↑ C1↓; C2↓; Savings ↓ C1↑; C2↑; Savings ↓ C1↓; C2↓; Savings ↑ C1↑; C2↓; Savings ↑If we model after-tax household income with a normal distribution, then the figures of a study imply the information in the following table. Assume that the distribution of incomes in each country is normal. \table[[Country,Country A,Country B,Country C,Country D,Country E],[Mean Household Income,$11,000,$40,000,$13,000,$12,000,$34,000One proposal includes increasing the EITC for childless workers to provide additional assistance for many poor workers. While an increase in the EITC would increase resources to qualifying childless workers, what impact will it have on their working decision? Assume a basic hours towards leisure and income towards consumption model. a. If qualifying childless workers already have a strong preference to work so they are already choosing to work (ex: 10 hours), an increase in the EITC could lead to a new choice involving fewer hours spent working, more hours spent towards leisure and more income towards consumption. Thus, the EITC expansion could discourage work. b.If qualifying childless workers already have a strong preference to not work so they are already choosing to work very littleand mostly enjoy leisure, an increase in the EITC could lead to a new choice involving more hours spent working, fewer hours spent towards leisure and more income towards consumption. Thus, the…