We want to study the effect of education level on wage, and we know that ability
ID: 2442232 • Letter: W
Question
We want to study the effect of education level on wage, and we know that ability is highly correlated with education and also affects wage, however, we omit ability and only include education in the regression model, which of the following assumption will be violated?
MLR.1. Linear in parameters
MLR.2. Random sampling
MLR.3. No perfect collinearity
MLR.4. Zero conditional mean
MLR.5. Homoskedasticity
MLR.6. Normality of error terms
A.MLR.1. Linear in parameters
B.MLR.2. Random sampling
C.MLR.3. No perfect collinearity
D.MLR.4. Zero conditional mean
E.MLR.5. Homoskedasticity
F.MLR.6. Normality of error terms
Explanation / Answer
Option D
When the important variable is excluded, it can cause bias when the omitted variable is correlated with the explanatory variable.
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