Q1 Sample Selection8 Points
Model 1: , with
Where denotes household ‘s average annual
consumption and denotes a measure of household ‘s
permanent income (both measured in thousands of USD). Suppose
that your sample consists of a random sample of consumption and
income data from the entire population of U.S. households, which is
your population of interest.
Q1.1
2 Points
Suppose that a computer glitch causes you to lose all the observations
for which . Will ordinary least squares (OLS) still
provide an unbiased estimator of if you estimate Model 1 using the
remaining data? Explain.
