Question

1._ You are estimating the following model explaining wages. Give an example of 3 variables (other than IQ) that would be considered “omitted” in this case. Wage_i=B0+B1Age_i+B2Female_i+B3Edu_i+ε_i

2._ You are estimating the following model explaining health. Give an example of 3 variables (other than genetics) that would be considered “omitted” in this case.

Health_i=B0+B1Age_i+B2Female_i+B3Edu_i+ε_i

Answer 1

the independent variable which is not included in the regression model bt may influence the dependent variable, called the omitted variable

1) age, female(gender), educational qualification depends on the wage that a person getting. But there are other factors which influence the wage such as

* year of experiences

*occupation

*job status

*sector of the job( private or government sector)

so these are omitted variables

2) If we are modeling the health, then the possible omitted variables other than the given independent variable are

* economic status

*Life style

*type of job (if the job is software type then you have to sit infront of computer so long may affect your health and the stress level leads to health problems )

*stress level

*food habits

*genetical disease, genitical back ground