Suppose you want to understand the impact of Medicaid coverage on reducing children malnutrition rate. Medicaid is a joint federal and state program that covers health care for low-income people at all ages. You have state-level data with the following variables: - Malnutrition i is the percentage of malnutrition children in state i. - Income ei is the per-capita income of the people in state i. a) Write down the Core Model of econometrics and the predicted model using bivariate OLS measuring the impact of Medicaid coverage on the children malnutrition rate. b) Do you think Income i and Medicaid i are correlated? If so, in what direction? c) Do you think Income ei and Malnutrition Mre correlated? If so, in what direction? 2 ? d) Based on your answers for part b and c, is the coefficient on Medicaid you get in part (a) biased? If so, what is the direction of the Omitted Variable Bias (OVB)? Did we underestimate or overestimate the coefficient on Medicaid i ? bias. Interpret the coefficient on Income in this problem's context. 2 f) We want to test the join significance of the coefficients on Income and Medicaid i. In Malnutrition i. Fill in the details for the first three steps of the F-test: Step 1 Write down your unrestricted model: Step 2 List your H0 : Suppose you want to understand the impact of Medicaid coverage on reducing children malnutrition rate. Medicaid is a joint federal and state program that covers health care for low-income people at all ages. You have state-level data with the following variables: - Malnutrition i is the percentage of malnutrition children in state i. - Income ei is the per-capita income of the people in state i. a) Write down the Core Model of econometrics and the predicted model using bivariate OLS measuring the impact of Medicaid coverage on the children malnutrition rate. b) Do you think Income i and Medicaid i are correlated? If so, in what direction? c) Do you think Income ei and Malnutrition Mre correlated? If so, in what direction? 2 ? d) Based on your answers for part b and c, is the coefficient on Medicaid you get in part (a) biased? If so, what is the direction of the Omitted Variable Bias (OVB)? Did we underestimate or overestimate the coefficient on Medicaid i ? bias. Interpret the coefficient on Income in this problem's context. 2 f) We want to test the join significance of the coefficients on Income and Medicaid i. In Malnutrition i. Fill in the details for the first three steps of the F-test: Step 1 Write down your unrestricted model: Step 2 List your H0
