ECO327Y5 Study Guide - Midterm Guide: Multicollinearity, Instrumental Variable, Dependent And Independent Variables
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Chapter 15 (iii) this is a natural experiment that affects whether or not some students own computers. (ii) families with higher incomes can afford to buy computers for their children. 15. 1 (i) it has been fairly well established that socioeconomic status affects student performance. The error term u contains, among other things, family income, which has a positive effect on. But as we suggested in part (i), faminc has a positive affect on gpa, so the first requirement for a good iv, (15. 4), fails for faminc. If we had faminc we would include it as an explanatory variable in the equation; if it is the only important omitted variable correlated with pc, we could then estimate the expanded equation by ols. Some students who buy computers when given the grant would not have without the grant. (students who did not receive the grants might still own computers. )
