This question asks how certain concepts. Two concepts are (A) The economic model

Question

This question asks how certain concepts. Two concepts are
(A) The economic model
(B) The statistical model
Please describe which concepts are used for each of the following purposes. Your answers may be: neither; A; B; or A and B.

i. Dening the OLS estimator.
ii. Dening what we are interested in, such as a specic question: how will wage change if education increases by 1 year, holding everything else xed.
iii. Concluding that the OLS slope coecient is a consistent estimator of ˜ 1.
iv. Concluding that if we regress Y on X, the slope coecient consistently estimates Cov(X,Y )/Var(X).
v. Determining whether to regress Y on X or X on Y .

Explanation / Answer

Solution

(a) Statistical model ,ordinary least squares (OLS) or linear least squares is a method for estimating the unknown parameters in a linear regression model. OLS chooses the parameters of a linear function of a set of explanatory variables by minimizing the sum of the squares of the differences between the observed dependent variable (values of the variable being predicted) in the given dataset and those predicted by the linear function.

(b) (A) The economic model

(c) Neither A and B

(d) Neither A and B

(e) Neither A and B

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