6.6 A researcher plans to study the causal effect of a strong legal system on the economy, using data from a sample of countries. The researcher plans to regress national income per capita on whether the country has a strong legal system or not (an indicator variable taking the value 1 or 0, based on expert opinion).

a. Do you think this regression suffers from omitted variable bias?

Which variables would you add to the regression?

b. Assess whether the regression will likely over- or underestimate the effect of police on the crime rate, based on the variables you think are omitted. (That is, do you think that b n 7 b or b n 6 b ?)