Touro shares an anecdote with us. His company sent him to China last week to carry out a study on demand for travel from Chinese residents. However, his colleagues in China warned him that China’s data have a great deal of measurement errors. He is wondering how we can control for this problem. Prof. Metric tells him not to worry, because we will discuss the issue this week. He says that upon finishing with this chapter, we will be able to:
1. Analyze several modeling issues in regression.
2. Explain cases when endogeneity occurs.
3. Detect endogeneity problems and perform the correction procedure.
4. Apply Excel tools into estimating the related models.
We will discuss the modeling issues first because ...