Which one of the following problems will not cause the endogeneity problem in a linear regression model? a. Errors-in-variables. b. Omitting relevant variables. c. Including irrelevant variables. d. Simultaneous equations.
Question
Which one of the following problems will not cause the endogeneity problem in a linear regression model?
a. Errors-in-variables.
b. Omitting relevant variables.
c. Including irrelevant variables.
d. Simultaneous equations.
Solution
The answer is c. Including irrelevant variables.
Endogeneity problem in a linear regression model is caused when there is a correlation between the explanatory variable and the error term. This can be due to measurement errors (errors-in-variables, option a), omitted variables (option b), or simultaneous equations (option d) where the dependent variable in one equation is used as an independent variable in another.
However, including irrelevant variables (option c) does not cause endogeneity. It may reduce the efficiency of the estimator and increase the standard error, but it does not bias the estimator, hence it does not cause an endogeneity problem.
Similar Questions
Which of the following statements is true about Endogenous variables?Endogenous variables are independent variableEndogenous variables is the dependent variableThe value of endogenous variables determines the value of dependent variableEndogenous variables is the same as exogenous variables
What are the two types of variables in economic models? (1.5 Marks)Question 10Select one:a.Behavioral and technicalb.Endogenous and exogenousc.Linear and nonlineard.Explanatory and dependent
Which of the following is an assumption of linear regression? Independence of errors All of the above Linearity between independent and dependent variables
Which of the following is NOT an endogenous variable in the Romer model?Group of answer choicesThe number of workers engaged in researchThe fraction of the population engaged in researchThe stock of knowledgeOutput
Which of the following is NOT possible assumption for carrying out linear regression? A. Linearity B. Normality of errors C. Inequality of variance D. Independence of error
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.