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Lecture12 - ECON 103 Lecture 12A Internal Validity of Multiple Regression Analysis Maria Casanova These slides are partly based on Ian Preston’s

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Unformatted text preview: ECON 103, Lecture 12A: Internal Validity of Multiple Regression Analysis Maria Casanova These slides are partly based on Ian Preston’s Lecture Notes for Applied Economics (UCL, 2005) May 12th (version 0) Maria Casanova Lecture 12A Requirements for this lecture: Chapter 9 of Stock and Watson Maria Casanova Lecture 12A 0. Introduction Studies based on regression analysis are internally valid if the estimated regression coefficients: are unbiased are consistent have associated standard errors that yield confidence intervals with the desired confidence level. In this lecture and the next: We will see 5 reasons why the OLS estimator of the multiple regression coefficients might be biased. We will investigate the circumstances that lead to inconsistent standard errors Maria Casanova Lecture 12A 0. Introduction Why do we care about potential bias of the OLS coefficients? The answer is related to the difference between 1 Describing the data and 2 Empirically modeling the social or economic processes involved. The second task is more ambitious, and will usually be our objective when we run a regression. The following slides illustrate this difference with an example. Maria Casanova Lecture 12A 0. Introduction The following table is based on a cross-sectional survey of 3,800 newspaper readers in the UK through 1983 to 1991 Number is red are column percentages. Newspaper Readership Tabloid Broadsheet All Same or more 931 297 1,228 29.74% 44.33% 32.32% Less 2,199 373 2,572 A t t i t u d e s t o I m m i g r a t i o n 70.26% 55.67% 67.68% All 3,130 670 3,800 Maria Casanova Lecture 12A 0. Introduction Looking at the table we can say that surveyed individuals who read tabloids regularly are more hostile to immigration than are those who read broadsheets. This would be a description of the data: = ⇒ a possibly interesting but as yet uninterpreted fact. As economists, we will usually want to interpret the data, that is, to analyze them in the framework of some economically or socially interesting question....
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This note was uploaded on 02/04/2010 for the course ECON 103 taught by Professor Sandrablack during the Spring '07 term at UCLA.

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Lecture12 - ECON 103 Lecture 12A Internal Validity of Multiple Regression Analysis Maria Casanova These slides are partly based on Ian Preston’s

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