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lect20_2010 - Introduction to Econometrics Econ 322 Fall...

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1 / 25 Introduction to Econometrics Econ 322 Fall, 2010 Lecture 20: Assessing the validity of Regression Models November 10, 2010
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Topics Covered triangleright Topics Covered Assessing Studies Based on Multiple Regression Internal and External Validity Assessing External Validity of a Regression model Assessing the Internal Validity of a Regression Model Solutions to Problems of Internal Validity Errors in Variables Sample selection bias Simultaneous causality bias Returns to Education 2 / 25 1. external validity of a regression model 2. internal validity of a regression model
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Assessing Studies Based on Multiple Regression Topics Covered triangleright Assessing Studies Based on Multiple Regression Internal and External Validity Assessing External Validity of a Regression model Assessing the Internal Validity of a Regression Model Solutions to Problems of Internal Validity Errors in Variables Sample selection bias Simultaneous causality bias Returns to Education 3 / 25 square Multiple regression has some key virtues: It provides an estimate of the effect on Y of arbitrary changes X. It resolves the problem of omitted variable bias, if an omitted variable can be measured and included. It can handle nonlinear relations (effects that vary with the X’s) square Still, OLS might yield a biased estimator of the true causal effect.
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Internal and External Validity Topics Covered Assessing Studies Based on Multiple Regression triangleright Internal and External Validity Assessing External Validity of a Regression model Assessing the Internal Validity of a Regression Model Solutions to Problems of Internal Validity Errors in Variables Sample selection bias Simultaneous causality bias Returns to Education 4 / 25 square There are two areas that we wish to evaluate our model Internal validity: the statistical inferences about causal effects are valid for the population being studied. External validity: the statistical inferences can be generalized from the population and setting studied to other populations and settings, where the “setting” refers to the legal, policy, and physical environment and related salient features.
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Assessing External Validity of a Regression model Topics Covered Assessing Studies Based on Multiple Regression Internal and External Validity triangleright Assessing External Validity of a Regression model Assessing the Internal Validity of a Regression Model Solutions to Problems of Internal Validity Errors in Variables Sample selection bias Simultaneous causality bias Returns to Education 5 / 25 square Here we ask the question of whether the results we get from our model are general or are only applicable to the data that we studied. square That is, external validity asks whether we can extend our results from the population being studied to another related population.
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