1) In The power of political voice: Womens political representation and crime in India,

Lakshmi Lyer and her coauthors study the effect of political representation among
under-represented social groups on crimes committed against members of the disadvantaged
group. In particular, they study the impact of increased female representation in local
governments on crimes against womens in India.
a) Do you expect the true causal effect of interest to be positive, negative or about zero? Why?
b) Suppose that they collected (observational) data across different Indian Municipalities in a
given year (say, 2005) on the fraction of women in the local council and the annual number of
crimes against women (normalized by population) they could then run an OLS regression
where crime could be the dependent variable and the fraction of women the main explanatory
variable. Do you think a simple OLS regression with no additional regressors would answer
the causal question of interest? Explain why such an OLS estimate would be biased, and in
which direction you think the bias would go.
c) Describe one variable that should be included in the regression and explain why?
d) Now suppose that they collect the same data for a different year (say, 1995). Write down the
regression that they could estimate now. Explain why we would expect our new estimate of
the causal effect of interest to be closer to the true one than before.
20 Marks
2) Assess whether the statements in a c are true or false and explain why.
a) One of the assumptions that needs to hold for the process (yt) to be weakly stationary is that
Cov (yt, yt-k) is constant over time and depends on both t and k.
b) A white noise process is a non-stationary process for which all auto correlations are equal to
zero.
c) If our series are non-stationary, it is safe to use OLS as our estimation method.
d) Why is serial correlation often present in time series data?
20 Marks
3a) Why is the presence of serial correlation in the residual a problem? Please provide a detailed
answer.
b) Suppose we can express serial correlation in Ut as follows.
Ut = Ut-1 + t
i) State the null hypothesis for testing serial correlation in the equation above.
ii) The residual Ut is usually unobserved. How would you estimate it?
20 Marks

4a) Write short note on each of the following.

i) Testing for weak instruments
ii) Relative Bias
iii) Rejection Rate
iv) Endogenous Variables
v) Structural Parameters
20 Marks
5) Consider the econometrics model below
= + 2 + ( ) = 0 ( ) = 2 = exp( )

Your research assistant came up with the following eight observations on

y 1.1
x -0.5
z 3.3

-0.5
-3
0.3

18.9
3.2
7.0

-0.9
-1.8
4.7

6.4
3.4
1.9

1.8
-3.5
6.8

4.5
2.4
2.3

-0.2
-0.2
6.4

Use a hand calculator to

a) Find least squares estimates of B1 and B2
b) Find the least square residuals
c) Estimate
d) Find variance estimates 2
20 Marks