Question 1 Suppose that you are interested in estimating the ceteris paribus relationship between wage and educ. For thi

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Question 1 Suppose That You Are Interested In Estimating The Ceteris Paribus Relationship Between Wage And Educ For Thi 1 (112.06 KiB) Viewed 10 times

Question 1 Suppose that you are interested in estimating the ceteris paribus relationship between wage and educ. For this purpose, you can collect data on a control variable, exper. Let a, be the simple regression estimate from wage on educ and let b₁ be the multiple regression estimate from wage on educ and exper. (That is, both a, and b₁ are estimated coefficients of educ.) Answer the following questions. (10 points) If educ is highly negatively correlated with exper in the sample, and exper has positive and large partial effects on wage, which relationship between a and b₁ is most appropriate? (2 points) (ii) If educ is slightly positively correlated with exper in the sample, and exper has positive and small partial effects on wage, which relationship between a, and b₁ is most appropriate? (2 points) (iii) If educ is highly correlated with exper, and exper has small partial effects on wage, would you expect se(a) or se(b₁) to be smaller? (2 points) (iv) If educ is uncorrelated with exper, and exper has large partial effects on wage, would you expect se(a₁) or se(b) to be smaller? (2 points) (v) Suppose that we add one more control variable, tenure, to the multiple regression model. If educ is almost uncorrelated with exper and tenure, but exper and tenure are highly correlated, will it adversely affect the analysis of the relationship between wage and educ? (2 points)