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ProblemSet2

# ProblemSet2 - ECON 3200 Introduction to Econometrics...

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ECON 3200 Introduction to Econometrics Problem set 2 (due date: February 13, 2009) Problem 1. (Wooldridge 3.8) Suppose that average worker productivity at manufacturing °rms ( avgprod ) depends on two factors, average hours of training ( avgtrain ) and average worker ability ( avgabil ): avgprod = ° 0 + ° 1 avgtrain + ° 2 avgabil + u: Assume that this equation satis°es the Gauss-Markov assumptions. If grants have been given to °rms whose workers have less than average ability, so that avgtrain and avgabil are negatively correlated, what is the likely bias in e ° 1 obtained from the simple regression of avgprod on avgtrain ? Problem 2. (Wooldridge 3.10) Suppose that you are interested in estimating the ceteris paribus relationship between y and x 1 . For this purpose, you can collect data on two control variables, x 2 and x 3 . (For concreteness, you might think of y as °nal exam score, x 1 as class attendance, x 2 as GPA up through the previous semester, and x 3 as SAT or ACT score.) Let e ° 1 be the simple regression estimate from y on x

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ProblemSet2 - ECON 3200 Introduction to Econometrics...

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