what instrumental variable you have in mind, summarise what you will use it

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

TASK

Produce a written report which addresses the judge’s question. As part of your report, you must:

 confirm whether you can replicate Table 1, equation (2), and equation (3) reported by the defendant’s consulting firm, CCG;

 critically evaluate their econometric approach;

 propose your own econometric approach which addresses the limitations that you have identified;

 report and discuss new estimation results based on your own approach;

 and outline any additional data that you require to improve the quality of your econometric analysis.

 

GENERAL TIPS

 Your report can follow any structure as long as you express your ideas clearly in academic English. You can include an executive summary if you think it will help you to communicate your ideas effectively. If you would like further guidance on how to write an empirical research report, you can consult “Chapter 19. Carrying Out an Empirical Project” in the required textbook for this module, i.e., Introductory Econometrics (7th ed.) by Jeffrey M. Wooldridge.

 In your critical evaluation and econometric analysis, you should focus on issues that enable you to demonstrate your understanding of the content taught in this module. For example, you can consider whether the CCG’s justification for their model specification is tenable given the algebraic and statistical properties of the OLS estimator; whether the CCG has paid due attention to omitted variable bias; and whether the CCG has followed an appropriate approach to hypothesis testing.

 

 Your additional data requirements must be stated as precisely as possible. For example, you must not simply write that you require an instrumental variable: You must name what instrumental variable you have in mind, summarise what you will use it for, and explain why you expect it to be relevant and exogenous. 

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