A researcher plans to study the causal effect of police on crime using data rom

Question

A researcher plans to study the causal effect of police on crime using data rom a random sample of US counties. He plans to regress the country's crime rate on the (per Capita) size of the country's police force.
a) explain why this regression is likely to suffer from omitted variables bias. Which variables would you add to regression to control for important omitted variables?
b) use your answer to (a) and the expression for omitted variables bias given in Equation (6.1) to determine whether the regression will likely over- or underestimate the effect of police on the crime rate. ( do you think ?? >

Explanation / Answer

A researcher plans to study the causal effect of police on crime using data from a random sample of U.S counties. He plans to regress the county’s crime rate on the (per capita) size of the county’s police forces. (a) Explain why this regression is likely to suffer from omitted variable bias. Which variables would you add to the regression to control for important variables? There are other important determinants of a country’s crime rate, including demographic characteristics of the population. (b) Use you answer to (a) and the expression for omitted variable bias to determine whether the regression will likely over-or underestimate the effect of police on the crime rate. Suppose that the crime rate is positively affected by the fraction of young males in the population, and that counties with high crime rates tend to hire more police. In this case, the size of the police force is likely to be positively correlated with the fraction of young males in the population leading to a positive value for the omitted variable bias so that beta' 1>beta 2

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