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Q1) When testing for overidentifying restrictions, the following procedure was suggested: 1. Estimate the structural equation by Two Stage Least Squares and obtain the Two Stage Least Squares residuals, (uˆ)1 (U hat subscript 1). 2. Regress (uˆ)1 on all exogenous variables. Obtain the R-squared, say, (R^2) subscript(1). 3. Under the null hypothesis that all Instrumental variable's are uncorrelated with u1, n(R^2) is approximately distributed by a chi-squared distribution with q degrees of freedom, where q is the number of instrumental variables from outside the model minus the total number of endogenous explanatory variables. If n(R^2)1 exceeds the critical value for the desired significance level in the chi-squared distribution, we reject the null hypothesis and conclude that at least some of the Instrumental Variables are not exogenous. Here, the (R^2) obtained in step 2 would be equal to zero always. Obtain this result in a simple regression model with an endogenous regressor X, Y = β0 + β1X + U1 and a single instrumental variable Z for X. Q2)Suppose that annual earnings and alcohol consumption are determined by the Simultaneous Equation Model: log(earnings) = β0 + β1alcohol + β2educ + u1 alcohol = γ0 + γ1 log(earnings) + γ2educ + γ3 log(price) + u2 where price is a local price index for alcohol, which includes state and local taxes. Assume that educ and price are exogenous. If β1, β2, γ1, γ2 and γ3 are all different from zero, which equation is identified? How would you estimate that equation?
1. inside the corporation there are ...... systems that motivate individuals and teams to make the most efficient
1) If the desired level of investment spending (I) is greater than the level of national savings (S), are net exports (NX) positive, negative, or zero? Explain the connection between I, S, and NX (in words as well as mathematically).
glucose levels in patients free of diabetes are assumed to follow a normal distribution with a mean of 120 and a
The inverse market demand curve for paper is given by P=400-2Q. There are two firms who produce fax paper. Each firm has unit cost of production equal to c=40, and they compete in the market quan-tities. That is, they can choose any quantity t..
If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli, a rare stone used in jewelry which is found only in Afghanistan, the company benefits from a barrier to entry.
If you receive a free ticket to a concert, what, if anything, is your opportunity cost of attending the concert How does your opportunity cost change if miserable weather on the night of the concert requires you to leave much earlier for the conce..
the engineering department of a large firm is overly crowded. In many cases, several engineers share on office. It is evident that the distraction caused by the crowded conditions reduces the productive capacity of engineers considerably.
Based on the Solow model, how would each of the following affect consumption per employee in the long run? Describe and illustrate your answer graphically.
Globalization is becoming very important in economic discussions. While some politicians favor protectionist policies because they feel these policies protect domestic producers, others claim free trade increases economic activity and has advantag..
by outsourcing overseas a company can reduce costs but must also take certain risks. global supply chains are exposed
Some people claim the "economic way of thinking" does not apply to issues such as health care. Explain how economics does apply to this issue by developing a "model" of an individual's choice
suppose that due to whatever reason reserve demand changes and you forecast the reserve demand to now be rd 270 - 30
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