Homework 5
Due in lab week 7 (the week of Feb. 20th)
1. Complete steps 1 through 3 of the Empirical Project Outline (as discussed in class).
2. Problem 8.3 on page 312 (page 253 in the previous edition).
3. What are the three requirements for a good instrumental variable?
[Note: The *next* homework will ask: (a) For your project, what econometric model do you plan to estimate and what hypothesis or hypotheses do you plan to test? (b) Depending upon whether your data are time-series or cross-sectional, test the model for autocorrelation or heteroskedasticity. (c) If you find a problem with either, explain explicitly how you plan to correct for it. If the tests do not indicate a problem, explain how you would have corrected for the problem had the test come out the other way (that is, no matter how the test comes out, explain how to correct for the problem of heteroskedasticity or autocorrelation as appropriate for your model).]
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