Econ2300.

In order to estimate the effect on wage of years of schooling, researcher B analysed the dataset that researcher A collected in the previous question. Researcher B considers the following regression equation, Iog(income), = 80 + 51 educ; + + u,- where educ; is years of school of individual ,- and includes additional terms associated with other characteristics in the data set. When researcher B was carefully examining omitted factors in the error term Ui' she realised that unobserved factors such as motivation; and work_ethic, would determine the Income level and be correlated With the variable of interest educi- If researcher B's conjecture regarding the unobserved factors is correct, then: A 5 a. The OLS estimator '81 would not be computed. 'The OLS estimator 81 would overestimate the effect on income; of QdUC," .d A c. The OLS estimator 81 would suffer imperfect multicollinearity. KN .' [l d . A " The OLS estimator 81 would have a large standard error. m A e. The OLS estimator 81 would follow the Student t-distribution with n-k degrees of freedom, where k is the number of coefcients to estimate in the model