Exam 3

Question 1

Endogenous Explanatory Variable

Answer 1

Variables that are determined by the equations in the system. Variables that are correlated with the error term.

Question 2

Exogenous Explanatory Variable

Answer 2

Any variable that is uncorrelated with the error term in the model of interests

Question 3

Robust Standard Error

Answer 3

Standard Error calculated that corrects for, is asymptotically robust to, heteroskedasticity in the model

Question 4

Natural Experiment

Answer 4

A situation where the economic environment - sometimes summarized by an explanatory variable - exogenously changes, perhaps inadvertently, due to a policy or institutional change.

Question 5

Measurement Error

Answer 5

the difference between an observed variable and the variable that belongs in a multiple regression equation

Question 6

Identification

Answer 6

A population parameter or set of parameters that can be consistently estimated

Question 7

Instrumental Variable

Answer 7

A variable that is used to identify an effect of an independent veritable on the dependent variable when MLR.4 is violated. In an equation with an endogenous explanatory variable, and IV is a variable that does not appear in the equation, in uncorrelated with the error term, and is (partially) correlated with the endogenous explanatory variable.

Question 8

Interaction Term

Answer 8

An independent variable in a regression model that is the product of two explanatory variables

Question 9

Lagged Dependent Variable

Answer 9

An explanatory variable that is equal to the dependent variable from an earlier time period

Question 10

Generalized Least Squares

Answer 10

An estimator that accounts for a known structure of the error variance (heteroskedasticity), serial correlation pattern in the errors, or both, via a transformation of the original model.

Question 11

Proxy Variable

Answer 11

An observed variable that is related but not identical to an unobserved explanatory variable in a multiple regression analysis. It is included in a regression in order to account for unobserved factors in a regression that may be correlated with the independent variables.

Question 12

Exclusion Restriction

Answer 12

Restrictions that state that certain variables are excluded from the model (or have zero population coefficients)

Question 13

Serial Correlation

Answer 13

Occurs when two observations of an error term are correlated. Eg. E(Us,Ut) not = 0, for t (not =) s

Question 14

Pooled Cross Section

Answer 14

A dataset that contains sets of individuals observed in multiple time periods. The individuals aren’t necessarily the same across time periods.

Question 15

difference-in-difference estimator

Answer 15

An estimator that arises in policy analysis with data for two time periods. One version of the estimator applies to pooled cross sections and another to panel data sets.

Question 16

classical errors-in-variables

Answer 16

A measurement error model where he observed measure equals the actual variable plus an independent (or at least uncorrelated) measurement error (tvhrs=tvhrs*+e)

Question 17

Base Group

Answer 17

The group represented by the overall intercept in a multiple regression model that includes dummy explanatory variables.

Question 18

Breusch-Pagan Test

Answer 18

A test for heteroskedasticity where the squared OLS residuals are regressed on the explanatory variables in the model.

Question 19

Two-Stage Least Squares

Answer 19

An instrumental variable estimator where the IV for an endogenous explanatory variable is obtained as the fitted value from regressing the endogenous explanatory variable on all exogenous variables.

Question 20

Attenuation Bias

Answer 20

Bias in an estimator that is always toward zero (underestimates the Beta); thus the expected value of an estimator with attenuation bias is less in magnitude than the absolute value of parameters.

Question 21

Control Group

Answer 21

In program evaluation, the group that doesn’t participate in the program and takes on any particular value with probability = 0

Question 22

Treatment Group

Answer 22

In program evaluation, the group that participates in the program.

Question 23

Panel Data

Answer 23

A data set constructed from a repeated cross section over time. With a balanced panel, the same units appear in each time period. With an unbalanced panel, some units do not appear in each time period, often due to attrition.

Question 24

Dummy Variable

Answer 24

A variable that takes on the value of 1 or 0. Eg: Gender, Race