ECON 710 Final: ECON 710 UW Madison Final Exam 2015
Document Summary
Final exam, spring 2015 yi = (cid:11) + (cid:12)xi + ei. E (xiei) = 0 with both yi and xi scalar. Assuming (cid:11) > 0 and (cid:12) < 0, suppose the parameter of interest is the area under the regression curve (e. g. consumer surplus), which is a = (cid:0)(cid:11)2=2(cid:12). Let ^(cid:18) = (^(cid:11); ^(cid:12))0 be the least-squares estimates of (cid:18) = ((cid:11); (cid:12))0 so that pn(cid:16)^(cid:18) (cid:0) (cid:18)(cid:17) !d n (0; v(cid:18)) and let ^v(cid:18) be a standard consistent estimate for v(cid:18). Suppose we also have a scalar instructment zi which satis(cid:133)es. Is this a su cient number of instruments? (c) write out the reduced form equation for x2 i . For simplicity we assume no intercepts. with x2. Assume yi; zi; and xi are scalar, and assume (cid:13) 6= 0. First, estimate (cid:13) by ols of xi on zi and construct the (cid:133)tted values ^xi = ^(cid:13)zi. Second, estimate (cid:12) by ols of yi on ^x2 i .
