EC220
Introduction to Econometrics
代考计量经济学 Because cognitive skills affect many economic and health-related outcomes, it is important to understand how such skills can be fostered.
Instructions to candidates 代考计量经济学
This paper contains 1 question. Marks for subquestions are indicated in the exam.
Answers should be justifified by showing work.
Please write your answers in dark ink (black or blue) only. If at any point in this exam you feel that
anything is unclear, please make additional assumptions that you feel are necessary and state them clearly.
Note: You are not expected to run any Stata command for this exam. 代考计量经济学
Time Allowed Reading Time: 15 minutes
Writing Time: 1 hour
You are supplied with: No additional materials
You may also use: No additional materials
Calculators: Calculators are allowed in this exam
Question 1 代考计量经济学
[100 marks]
Because cognitive skills affect many economic and health-related outcomes, it is important to understand how such skills can be fostered. Video game developers advocate that playing video games can improve cognitive skills such as problem solving, abstract reasoning, and spatial logic. Using a survey of 4,534 randomly sampled age 10 children, an economist aims to estimate the causal effect of time spent playing video games on cognitive skills.
The survey includes various characteristics of the families, the parents (education, ethnicity, income, age, occupations, etc.), and the children themselves. The time spent playing video games is measured using a time diary. A child (or his/her parent) is asked to randomly choose a weekday and list all his/her activities in the 24 hour time diary, importantly they record the times at which the activity started and ended.
The economist obtains three variables representing how a child spent his/her 24 hours in a random weekday:
(i) V ideo Games – the number of hours spent playing video games, (ii) P roductive Activities – the number of hours spent on activities that are conventionally deemed to positively affect cognitive skills such as reading educational books, doing homework, or exercising; and (iii) Unproductive Activities – the number of hours spent on unproductive activities that might possibly have little effect on cognitive skills, for example, travelling, watching television, shopping, or eating. These variables are defifined such that any activity would fall into one of the three categories although it is possible that mistakes are made when recording data. The data are only recorded once a week.
To measure cognitive skills, the economist uses an international mathematics test, which assesses children’s ability to solve mathematical reasoning problems. The score for each child, recorded as M aths Scores, has been standardised to have a mean of 0 and a standard deviation of 1. 代考计量经济学
(a)The economist specififies a baseline regression equation with M aths Scores as the outcome and V ideo Games on the right side. He also insists on including either P roductive Activities or Unproductive Activities in any regression. Explain whether or not including one of the vari ables benefifits the estimation. Should he include bothP roductive Activities andUnproductive Activities in the regressions? Explain.[20 marks]
The economist runs several regressions and obtains the following table, with robust standard errors reported in the parentheses.
Interpret the coeffificient on V ideo Games in Column (1). Discuss two distinct reasons why we cannot interpret the coeffificient causally. In your answer, discuss the distinct biases associated with the reasons and their directions.[20 marks] 代考计量经济学
(c)The economist constructs the following covariates, M ale – a binary variable that takes value 1 if the child is a male, Siblings – the number of siblings, P arental Education – the parents’ education, and Income – the household’s income. To save space, these variables are summarised as Other Covariates and included in Column (2). Which issue(s) is the economist trying to address by including Other Covariates in Column (2)? Is this likely to be successful? Explain why or why not.[10 marks]
(d)The economist is concerned that the underlying reason for results observed in Columns (1)and (2) is the child’s improved reading skills. (i.e. playing video games involves reading, and by improving reading abilities, students understand and perform better on mathematics tests). The economist uses another variable, Reading, which is a standardised measure of a child’s reading ability, as a dependent variable and reports the result in Column (3). What is the interpretation of the coeffificient on V ideo Games in Column (3)? Discuss whether the result can help alleviate the economist’s concern.[10 marks] 代考计量经济学
(e)A research assistant suggests that the economist should include the variable Reading as a covariate in the regression in column (2). Carefully explain whether or not the economist should follow the suggestion.[15 marks]
(f)The economist has another variable Games on W eekend that measures the number of hours per day a child spent playing video games over weekends. He uses the variable as an instrumental variable for V ideo Games and reports the result in Column (4). Carefully explain whether he can interpret the coeffificient on V ideo Games in Column (4) causally now. To begin your answer, explain the intuition behind this approach and evaluate any necessary assumptions this strategy requires. What type of bias(es) might this approach help overcome? Discuss whether the economist can test the validity of the assumptions. If your answer is yes, explain how to perform such test(s).[25 marks]
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