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Lecture 34

ECON 2209 Lecture 34: 24April_EconStats_Karagodsky
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Department
Economics
Course
ECON 2209
Professor
Karagodsky
Semester
Fall

Description
EconStats Notes 24 April 2017 Unbiasedness and Consistency An unbiased estimator: E[] = . Y = + x + ^ ^ Y = ^ + X E[^] = E[] = An estimator is consistent if : n > 1as sample size increases > the estimator becomes closer to being accurate How can we have an estimator that is consistent but biased? most common in the real world cov(x, ) 6= 0 leads to indogeneity, where x is the right and side variable and is the error term. wage = + Educ + where is a black box for all other variables that have an eect. If something like household income were there this would be an issue. HHincome might be correlated to education, so you are double counting for education. Problems Causes of indogeneity: 1. Omitted variable bias (forgetting HHincome) 2. Measurement error 3. Reverse causality (cov(X;) 6= 0) 1
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