Question 1

If Z is a weak instrument, please explain how its use will influence the variance of Bj.

Accepted Answer

A weak instrument is one that does a poor job of explaining X1 when controlling for other factors Its use in the model leads to a higher variance of Bj because X1hat will completely depend on the other independent variables (meaning R of a regression predicting X1 as a function of the non-instrumental variables will be high

Question 2

Please explain what an overidentification test is.

Accepted Answer

We use overidentification tests when we have multiple instruments If each instrument satisfies both the inclusion and the exclusion conditions, than using each one (on its own should produce unbiased coefficient estimates The coefficient estimate for the endogenous variable should be similar when using each instrumental variable alone However, if we use each instrument alone and they produce varying estimates of the coefficient, then we must rethink the use of the instruments as one or both does not satisfy the conditions for a good instrumental variable

Question 3

Given the model
Crimeit=B0+B1Policei,t+eit,
Which one of the following potential instrumental variables do you think would not satisfy the inclusion condition?

Accepted Answer

A)  The wealth of the city 
B)  The population density of the city 
C)  The number of guns in the city 
D)  Number of candy stores in the city 
A)  The wealth of the city 
B)  The population density of the city 
C)  The number of guns in the city 
D)  Number of candy stores in the city D

Question 4

Explain why attrition in randomized experiments can cause a problem, and explain one method of dealing with the problem of attrition.

Accepted Answer

The answer of Explain why attrition in randomized experiments can...

Question 5

Which one of the following are factors that influence the variance of 2SLS Bj estimates?

Accepted Answer

A)  Model fit 
B)  Sample size 
C)  Explanatory power of the instrument in explaining X 
D)  Overall fit of the first stage regression 
E)  All of the above 
A)  Model fit 
B)  Sample size 
C)  Explanatory power of the instrument in explaining X 
D)  Overall fit of the first stage regression 
E)  All of the above

Question 6

The variance of coefficient estimates in 2SLS is generally smaller than the variance of coefficient estimates in OLS.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a justification for overidentification tests?

Accepted Answer

A)  If each instrument satisfies both the inclusion and exclusion condition, than using each instrument alone should produce an unbiased estimate of B1. 
B)  If each instrument satisfies both the inclusion and exclusion condition, than using each instrument alone will produce biased results. 
C)  Once we identify the excessive identification condition, the efficiency of our estimates will improve. 
D)  They allow us to identify weak instruments. 
A)  If each instrument satisfies both the inclusion and exclusion condition, than using each instrument alone should produce an unbiased estimate of B1. 
B)  If each instrument satisfies both the inclusion and exclusion condition, than using each instrument alone will produce biased results. 
C)  Once we identify the excessive identification condition, the efficiency of our estimates will improve. 
D)  They allow us to identify weak instruments.

Question 8

The inclusion condition states that the instrument used must be a statistically significant determinant of Y.

Accepted Answer

A) True 
 B)False

Question 9

We cannot test if an instrument satisfies the exclusion condition statistically.

Accepted Answer

A) True 
 B)False

Question 10

Please list two of the factors that influence the variance of 2SLS Bj estimates, and explain how they influence the variance of 2SLS Bj estimates.

Accepted Answer

The answer of Please list two of the factors that...

Question 11

Suppose we wish to know if long prison sentences reduce the probability of recidivism. The basic model is
Repeat crimei=B0+B1SentenceLengthi+ei
Where repeat crime is 1 for released prisoners who end up being sent back to jail after release. Which of the following is viable as an instrumental variable?

Accepted Answer

A)  A variable indicating the severity of the initial crime. 
B)  A variable indicating that the person had been randomly assigned to a judge with a record of harsh sentencing. 
C)  A variable indicating that the person had been randomly assigned to an educational program while in prison. 
D)  A variable indicating whether the person was a high school dropout. 
A)  A variable indicating the severity of the initial crime. 
B)  A variable indicating that the person had been randomly assigned to a judge with a record of harsh sentencing. 
C)  A variable indicating that the person had been randomly assigned to an educational program while in prison. 
D)  A variable indicating whether the person was a high school dropout.

Question 12

An instrumental variable explains both the endogenous independent variable of interest and the dependent variable.

Accepted Answer

A) True 
 B)False

Question 13

The variance of 2SLS Bj will be lower if:

Accepted Answer

A)  If we have a weak instrument 
B)  If we have a worse fit at the first stage of the regression 
C)  If the instrument has a high explanatory power for X 
D)  If we have a smaller sample size 
A)  If we have a weak instrument 
B)  If we have a worse fit at the first stage of the regression 
C)  If the instrument has a high explanatory power for X 
D)  If we have a smaller sample size

Question 14

Please explain how non-compliance could lead to a problem of endogeneity, and explain how ITT can be used to deal with the problem.

Accepted Answer

The answer of Please explain how non-compliance could lead to...

Question 15

Which of the following best characterizes the conditions for a good instrument?

Accepted Answer

A)  Z is statistically significant in the first-stage and exerts a direct effect on Y. 
B)  Z is statistically significant in the first-stage and exerts no direct effect on Y. 
C)  Z is uncorrelated with both X and Y. 
D)  Z needs to be included in both stages in order for 2SLS to be appropriate. 
A)  Z is statistically significant in the first-stage and exerts a direct effect on Y. 
B)  Z is statistically significant in the first-stage and exerts no direct effect on Y. 
C)  Z is uncorrelated with both X and Y. 
D)  Z needs to be included in both stages in order for 2SLS to be appropriate.

Question 16

In order to statistically verify that an instrument satisfies the exclusion condition, we can:

Accepted Answer

A)  Run a regression of the instrument against the dependent variable of interest. 
B)  Run a regression of the instrument against the independent variable of interest. 
C)  There is no way to statistically satisfy the exclusion condition. 
D)  Run an overidentification test. 
A)  Run a regression of the instrument against the dependent variable of interest. 
B)  Run a regression of the instrument against the independent variable of interest. 
C)  There is no way to statistically satisfy the exclusion condition. 
D)  Run an overidentification test.

Question 17

A weak instrument (an instrument that does a poor job of explaining the endogenous variable) will always produce better results than OLS.

Accepted Answer

A) True 
 B)False

Question 18

The estimation of an instrumental variable model requires:

Accepted Answer

A)  Allows only one endogenous regressor. 
B)  Requires exact identification 
C)  Requires exact identification or overidentificaion 
D)  Requires more endogenous variables than instruments. 
A)  Allows only one endogenous regressor. 
B)  Requires exact identification 
C)  Requires exact identification or overidentificaion 
D)  Requires more endogenous variables than instruments.

Question 19

Describe the process of blocking in a randomized experiment.

Accepted Answer

The answer of Describe the process of blocking in a...

Question 20

Which of the following is true about weak instruments?

Accepted Answer

A)  A weak instrument is correlated with the error term. 
B)  The larger the sample size, the bigger the problem (bias) caused by the use of a weak instrument. 
C)  A weak instrument is an instrument that does a poor job of explaining X. 
D)  A weak instrument fails the exclusion condition. 
A)  A weak instrument is correlated with the error term. 
B)  The larger the sample size, the bigger the problem (bias) caused by the use of a weak instrument. 
C)  A weak instrument is an instrument that does a poor job of explaining X. 
D)  A weak instrument fails the exclusion condition.

If Z is a weak instrument, please explain how its use will influence the variance of Bj.

Please explain what an overidentification test is.

Given the model Crime_it=B₀+B₁Police_i,t+e_it, Which one of the following potential instrumental variables do you think would not satisfy the inclusion condition?

Explain why attrition in randomized experiments can cause a problem, and explain one method of dealing with the problem of attrition.

Which one of the following are factors that influence the variance of 2SLS Bj estimates?

The variance of coefficient estimates in 2SLS is generally smaller than the variance of coefficient estimates in OLS.

Which of the following is a justification for overidentification tests?

The inclusion condition states that the instrument used must be a statistically significant determinant of Y.

We cannot test if an instrument satisfies the exclusion condition statistically.

Please list two of the factors that influence the variance of 2SLS Bj estimates, and explain how they influence the variance of 2SLS Bj estimates.

An instrumental variable explains both the endogenous independent variable of interest and the dependent variable.

The variance of 2SLS Bj will be lower if:

Please explain how non-compliance could lead to a problem of endogeneity, and explain how ITT can be used to deal with the problem.

Which of the following best characterizes the conditions for a good instrument?

In order to statistically verify that an instrument satisfies the exclusion condition, we can:

A weak instrument (an instrument that does a poor job of explaining the endogenous variable) will always produce better results than OLS.

The estimation of an instrumental variable model requires:

Describe the process of blocking in a randomized experiment.

Which of the following is true about weak instruments?

The Quest for Causality

Stats in the Wild: Good Data Practices

Bivariate Ols: the Foundation of Econometric Analysis

Hypothesis Testing and Interval Estimation: Answering Research Questions

Multivariate Ols: Where the Action Is

Dummy Variables: Smarter Than You Think

Specifying Models

Using Fixed Effects to Fight Endogeneity in Panel Data and Difference-In-Difference Models

Experiments: Dealing With Real-World Challenges

Regression Discontinuity: Looking for Jumps in Data

Dummy Dependent Variables

Time Series: Dealing With Stickiness Over Time

Advanced Ols

Advanced Panel Data

Filters

Exam 9: Instrumental Variables: Using Exogenous Variation to Fight Endogeneity

If Z is a weak instrument, please explain how its use will influence the variance of Bj.

Please explain what an overidentification test is.

Given the model Crimeit=B0+B1Policei,t+eit, Which one of the following potential instrumental variables do you think would not satisfy the inclusion condition?

Explain why attrition in randomized experiments can cause a problem, and explain one method of dealing with the problem of attrition.

Which one of the following are factors that influence the variance of 2SLS Bj estimates?

The variance of coefficient estimates in 2SLS is generally smaller than the variance of coefficient estimates in OLS.

Which of the following is a justification for overidentification tests?

The inclusion condition states that the instrument used must be a statistically significant determinant of Y.

We cannot test if an instrument satisfies the exclusion condition statistically.

Please list two of the factors that influence the variance of 2SLS Bj estimates, and explain how they influence the variance of 2SLS Bj estimates.

An instrumental variable explains both the endogenous independent variable of interest and the dependent variable.

The variance of 2SLS Bj will be lower if:

Please explain how non-compliance could lead to a problem of endogeneity, and explain how ITT can be used to deal with the problem.

Which of the following best characterizes the conditions for a good instrument?

In order to statistically verify that an instrument satisfies the exclusion condition, we can:

A weak instrument (an instrument that does a poor job of explaining the endogenous variable) will always produce better results than OLS.

The estimation of an instrumental variable model requires:

Describe the process of blocking in a randomized experiment.

Which of the following is true about weak instruments?

The Quest for Causality

Stats in the Wild: Good Data Practices

Bivariate Ols: the Foundation of Econometric Analysis

Hypothesis Testing and Interval Estimation: Answering Research Questions

Multivariate Ols: Where the Action Is

Dummy Variables: Smarter Than You Think

Specifying Models

Using Fixed Effects to Fight Endogeneity in Panel Data and Difference-In-Difference Models

Experiments: Dealing With Real-World Challenges

Regression Discontinuity: Looking for Jumps in Data

Dummy Dependent Variables

Time Series: Dealing With Stickiness Over Time

Advanced Ols

Advanced Panel Data

Filters

Given the model Crime_it=B₀+B₁Police_i,t+e_it, Which one of the following potential instrumental variables do you think would not satisfy the inclusion condition?