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Unformatted text preview: Economics 120C Name: _________key________________ Professor Yongil Jeon Spring 2010 Student ID#: _______key_______________ Answer Key to Homework #2, Spring 2010 (A Part of Exams #1 and #2, Summer 2009 - Session 2) Answer all questions on separate paper. This problem set should be handed in to your TA at the beginning of your discussion class on Friday, May 21, 2010. Problem sets may not be handed in once solutions have been distributed. Please write down your name and PID clearly. Good luck! 1. (24 points) Multiple Choices (4 points each) a) The difference between an unbalanced and a balanced panel is that a. you cannot have both fixed time effects and fixed entity effects regressions. b. in an unbalanced panel, observations are missing for one entity in, at least, one time period. c. the impact of different regressors are roughly the same for balanced but not for unbalanced panels. d. in the former you may not include drivers who have been drinking in the fatality rate/beer tax study. Answer : b b) In the Fixed Effects regression model, using ( n 1) binary variables for the entities, the coefficient of the binary variable indicates a. the level of the fixed effect of the i th entity. b. will be either 0 or 1. c. the difference in fixed effects between the i th and the first entity. d. the response in the dependent variable to a percentage change in the binary variable. Answer : c c) Time Fixed Effects regression are useful in dealing with omitted variables a. even if you only have a cross-section of data available. b. if these omitted variables are constant across entities but vary over time. c. when there are more than 100 observations. d. if these omitted variables are constant across entities but not over time. Answer : b d) Consider a panel regression of unemployment rates for the G7 countries (United States, Canada, France, Germany, Italy, United Kingdom, Japan) on a set of explanatory variables for the time period 1980-2000 (annual data). If you included entity and time fixed effects, you would need to specify the following number of binary variables: 2 Answer to HW#2, ECON 120C, Spring 2010 a. 21. b. 6. c. 28. d. 26. Answer : d e) In the context of a controlled experiment, consider the simple linear regression formulation 1 i i i Y X u = + + . Let the Y i be the outcome, X i the treatment level when the treatment is binary, and u i contain all the additional determinants of the outcome. Then calling & 1 a differences estimator a. makes sense since it is the difference between the sample average outcome of the treatment group and the sample average outcome of the control group. b. and & the level estimator is standard terminology in randomized controlled experiments....
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- Spring '10