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EC 421 HW - Sarah Lowery November 1 2011 EC 421 HW#4 1...

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Sarah Lowery November 1, 2011 EC 421 HW #4 1. Write out a mathematical representation of the theory. Suggest using different functional forms if you think it better fits your data. Explicitly identify the variables relevant to your analysis. Think about using appropriate explanatory variables to address different characteristics of your airport or location and dummies to address seasonalities, sudden drops or jumps in time, etc. Make sure to include a brief discussion on why the model/functional form/variables are relevant to your analysis. Include some discussion of error terms and violations of the classical assumptions on errors, do you expect heteroskedasticity, the lack of independence through time? 2. a) The effect of campaign donations on voting: you believe that voting helps determine campaign donations. If this is true, simultaneous equation bias, or an endogeneity bias, will arise. b) The effect of a simultaneous equation bias is that OLS will yield inconsistent estimates if it is used to fit the equation.
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