A researcher is interested in the effect of a US state having access to the ocea

Question

A researcher is interested in the effect of a US state having access to the ocean (a dummy variable AO) on the density of the population of that state. The density of the population can be a ected by many unobserved characteristics of the state including the preferences of the residents, which are hard to measure. To address this, the researcher decides to use panel data with state fixed effects. The researcher collects the data on the population density (PDst) and average yearly temperatures (YTie) for each year t between 2000 and 2012 for each of the US states i. The researcher then plans to run a panel data regression: What is the main problem with this empirical strategy?

Explanation / Answer

1. The polulation desity of ocean you want to measure are usually dependent on lots of independent variable like (count of industry in the city, count of household in the city, the polution rate, the growth etc.) Instead you are just trying to check the temperature of the yearly temperature as the explainatory variable. So firstly your model will suffer from the high amount of omitted variable bias.

Here my advice is try to gather more and more exolanatory variable to.

2.We take the dummy variable as categorical or binary. But the dummy in your model explains the podulation desity of your city. So it is usually continious by nature.

3. So try to capture more and more explanetory variable and use the dummy variable appropriately.  

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.