Instructions: All questions are compulsory.

Each question is equal marks.

TASK: EC3017 Applied Econometrics Assignment

Question 1.

When there are omitted variables in the regression, which are determinants of the dependent variable, then

a) you cannot measure the effect of the omitted variable, but the estimator of your included variable(s) is (are) unaffected

b) this has no effect on the estimator of your included variable because the other variable is not included

c) this will always bias the OLS estimator of the included variable

d) the OLS estimator is biased if the omitted variable is correlated with the included variable

Question 2.

Possible solutions to the omitted variable bias, when the omitted variable is not observed, include the following with the exception of

a) panel data estimation

b) nonlinear least squares

c) use of instrumental variables regression

d) use of randomized controlled experiments

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