Lecture+6+Regression+with+panel+data

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Unformatted text preview: Culture” around drinking and driving /historically high rate of drunk driving state o States where people are more tolerant of drunk drinking tend to have more drunk driving o Such states may also be more likely to implement the beer tax, then it will lead to positive bias. • Popularity of teenage drinking o Popularity of teenage drinking means more drunk driving. o States with higher teenage drinking tend to implement higher alcohol taxes. 2 • Any third factors that are positively correlated with both drunk driving and alcohol taxes may lead to a misleading positive correlation between drunk driving and alcohol taxes. 2. GPA and percentage of classes skipped per quarter Observational unit: a student in a quarter • 1000 students, so n = number of entities = 1,000 • 3 quarters, so T = # of time periods = 3 • So total # observations = 1,000*3 = 3,000 Variables: • GPA • percentage of classes skipped /quarter • Other (HS GPA, SAT, male etc) Possible omitted variable bias due to omitted variables that are correlated with both GPA and percentage of classes skipped: • Inherent laziness o Lazy students tend to skipped more classes o Lazy students tend to have lower GPA because of not working hard on learning anyways • Innate ability o If smart students skip few classes, then it is negatively correlated with percent...
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This document was uploaded on 03/11/2014.

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