Question

When studying the impact of college graduation on wages, we use the distance of college from childhood home as the instrumental variable.

a. What are outcome Y, treatment status D, and instrument T?

b. Why is OLS biased? In other words, can you come up with an omitted variable that may bias the OLS result?

c. What is the relevance condition? Write out its mathematical expression, and access if it is likely to hold in this case. How would you go and check the relevance condition in your data?

d. Who are always-takers, never-takers, compliers and defiers?

e. Specify the first stage regression (don’t include controls)

f. Specify the reduced form regression (don’t include controls)

Answer 1

Answer :

(a) outcome Y, treatment status D, and instrument T :-

Y: wages of locals D: number of outsiders

T: level of outsiders in urban communities from 10 years sooner

(b)

A model would be a bigger city pulling in a more extensive scope of outsiders which residents will in general have a higher pay in bigger urban areas contrasted with littler and confined urban communities.

(d) the always-takers, never-takers, compliers and defiers :-

1. Continuously takers: sub populace with D=1 paying little mind to the estimation of T.Immigrants in urban areas regardless of the level of foreigners in urban areas from 10 years sooner 2. Never-takers: sub populace with D=0 paying little mind to the estimation of T.Few settlers in urban communities regardless of the level of workers from 10 years sooner 3. Compliers : sub populace with D=1 if T=1 and D=0 if T=0.A part of outsiders in light of the fact that the level of migrants was high 10 years prior and the other way around 4. Defiers: sub populace with D=1 if T=0 and D=0 if T=1.Few settlers on the grounds that the level of workers was high 10 years back and the other way around.

(e) the first stage regression :-

First stage: D=α+γT+ε,

For this situation,

it would be spoken to as; # of the migrants =α + γimmigrant 10 years prior + ε

NOTE : as per the HOMEWORKLIB RULES. i have little bit confused in c and f bits. if you need that bits please re up load on another question. Thank You.....