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Question 1 (0.5 mark) Consider the following regression model; y= 0423 1X+u 1. If y, is individual is University GPA and as, is the individuals
Question 1 (0.5 mark) Consider the following regression model; y= 0423 1X+u 1. If y, is individual is University GPA and as, is the individuals high school grades, what do you think is in 11,-? Do you think E[u|X] : 0? What sign of bias would you expect in an OLS regression of y on X '? 2. If y,- is unemployment in locationi and an; is an indicator of whether or not there is a minimum wage in location i, what do you think is in u? Do you think E[u|X] : 0? What sign of bias would you expect in an OLS regression of y on X '3 3. If y,- is nal exam score of indivduali and 3:, is class size of individual i, what do you think is in a? Do you think E [u[X] : 0? What sign of bias would you expect in an OLS regression of 3; on X '3' 4. If y; is earnings of indivduali and an indicates whether individuali is a recent immigrant, what do you think is in a? Do you think E [ulX] = 0'? What Sign of bias would you expect in an OLS regression of y on X ? Question 2 (0.5 mark) An economist wanted to investigate the relationship between X (weeks of job search) and y (salary in $1,DDOS). He took a random sample of fty people looking for a job in the area of nance, and the data produced the sums below: 2,13% : 2510 in)? : 138370 i112 : 92 is? : 220 {:1 {:1 i:1 :1 2(9, y)? : 2128 its, a? : 50.72 its, e)(y,- g) : 51.4 11:1 2':1 2':1 a) What type of data is this, time series, cross sectional or panel data? b) Calculate the mean and variance of the salary. c) Calculate the coefcient of correlation between the weeks of job search and the starting salary. What does this tell the economist about the relationship
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