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a) Consider the following regression model: Yi=0+1X1i+ui Where Yi is a continuous variable, and X1i is a 01 dummy variable. How would you interpret the
a) Consider the following regression model: Yi=0+1X1i+ui Where Yi is a continuous variable, and X1i is a 01 dummy variable. How would you interpret the coefficients on 1, and 0 ? What is ui ? [5 marks] b) Assume that ui, is characterised by E(uiXi)=0. What are the consequences for Ordinary Least Squares estimation of this model? Explain your answer in detail. [20 marks] c) Consider the following linear regression: Yi=0+1Xi+ui Use this expression to show that the OLS estimator ^1 is an unbiased estimator of the true population parameter 1 [20 marks]
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