FINA3050_L6

Which of the following is true of the White test?

• The White test is used to detect the presence of multicollinearity in a linear regression model.

• The White test cannot detect forms of heteroskedasticity that invalidate the usual OLS standard errors.

• The White test can detect the presence of heteroskedasticity in a linear regression model even if the functional form is misspecified.

• The White test assumes that the square of the error term in a regression model is uncorrelated with all the independent variables, their squares, and cross products.

Which of the following is a reason for using independently pooled cross sections?

• To obtain data on different cross-sectional units.

• To increase the sample size.

• To select a sample based on the dependent variable.

• To select a sample based on the independent variable.

Which of the following is true of a natural experiment?

• A natural experiment occurs when some endogenous event changes the environment in which individuals, families, firms, or cities operate.

• The control group in a natural experiment is randomly chosen.

• The treatment group in a natural experiment is randomly chosen.

• Control and treatment groups in a natural experiment arise due to an exogenous event.

The average treatment effect measures _____.

• The effect of a policy or program on the dependent variable.

• The effect of unobserved factors on observed explanatory variables.

• The effect of a change in an explanatory variable on other explanatory variables.

• The effect of unobserved factors on the average outcome of the dependent variable.

The systematic differences between the control and treatment groups can be controlled by taking two years of data, _____.

• One treatment group before policy change and one after the change.

• One before the policy change and one after the change.

• One control group and one treatment group.

• One control group before policy change and one after the change.

If each variable in a single cross-sectional equation is differenced over time, then it is called the:

• Unobserved effects model.

• First-differenced estimator.

• Fixed effects model.

• First-differenced equation.

Which of the following assumptions is required to obtain a first-differenced estimator in a two-period panel data analysis?

• The explanatory variable does not change over time for any cross-sectional unit.

• The explanatory variable changes by the same amount in each time period.

• The variance of the error term in the regression model is not constant.

• The idiosyncratic error at each time period is uncorrelated with the explanatory variables in both time periods.

Which of the following is an advantage of panel data?

• We can difference the dependent variable, y, across time for different cross-sectional units.

• We can add the dependent variable, y, across time for different cross-sectional units.

• We can difference the dependent variable, y, across time for the same cross-sectional units.

• We can add the dependent variable, y, across time for the same cross-sectional units.

Suppose we are studying the effects of expanded income supplement for senior citizens on their health. We use the two-group, two-period differences-in-differences setup, with working-age citizens as our control group. Which of the following is a key assumption for the validity of this identification strategy?

• In the absence of the intervention, the average health outcomes would be the same for both groups.

• Before the intervention, the average health outcomes were the same for both groups.

• After the intervention, the average health trends would be the same for both groups.

• In the absence of the intervention, the average health trends would be the same for both groups.