Question

Suppose that you are asked to investigate the hypothesis that a grade on a final test in Econ 227 (grade) depends on classes attended (att). The data come from ECON 227 class for the spring 2016 semester.

I need help on the part C, D, and E parts of the question.

(a) Present economic model of the hypothesis.

grade = f (att , others)

(b) Turn your economic model in (a) into an econometric model.

grade = B₀ + B₁ att + u

(c) What kinds of factors are contained in u? List at least two factors and explain why.

(d) What economic data sets (time series vs. cross sectional) are you going to collect to analyze your econometric model? And explain why?

(e) Explain the zero conditional mean assumption using your model in (b)

Answer 1

c.)

The other factors that can be included in " others" are the ones that affect the grade but are not related to the class attendance. There factors can be as follows -

- No. of hours of study: A student's grade will also depend on the number of hours that the student devotes to study and to finish his coursework.

- Timeliness of assignment submission: If a student does his assignments on time and is up to date with what is done in class, then the student's grade is bound to improve.

d.)

Four variables are required for the purpose of this analysis -

- Grade (cross section): The student's overall grade

- attendance (cross section): The students attendance percentage at the end of the academic period

- No. of hours of study (cross section): The student's average number of hours of study in a week

- Timeliness of assignment submission (cross section): The number of assignments that the student has not submitted on-time (or has submitted on time) over the academic period

All these variables are cross section because they are obtained at a point in time and are for four different variables.

e.)

The zero conditional mean assumption means that irrespective of the sample n question, the mean of the error terms u will be zero.

Consider there are five different samples of 30 students each, on whom this model is estimated. The zero conditional mean assumption means that irrespective of which sample is chosen, the mean of the error terms will be zero, which means that all the samples will be representative.