Question

Let kids denote the number of children ever born to a woman, and let educ denote years of education for the woman. A simple model relating fertility to years of education is

kids 5 b0 1 b1educ 1 u,

where u is the unobserved error.

(i) What kinds of factors are contained in u? Are these likely to be correlated with level of education?
(ii) Will a simple regression analysis uncover the ceteris paribus effect of education on fertility? Explain.

Answer 1

Answer:

(i) Factors that are contained in u are those that are correlated with the educational level and those that are uncorrelated. A typical example of factors that are correlated with the educational level is the parents' education of the woman while that of the factors that are uncorrelated with the educational system is the possibility of the group sample containing children.

(ii) No, it will not uncover the effects of cetaris paribus on the educational system and fertility of women. This is because of the complexity of the causal effect between the educational system and the fertility of a woman. The mathematical model would need to consider both the correlated and uncorrelated factors and must be unbiased.

Explanation:

(i) Factors that are contained in u are those that are correlated with the educational level and those that are uncorrelated. A typical example of factors that are correlated with the educational level is the parents' education of the woman while that of the factors that are uncorrelated with the educational system is the possibility of the group sample containing children.

(ii) No, it will not uncover the effects of cetaris paribus on the educational system and fertility of women. This is because of the complexity of the causal effect between the educational system and the fertility of a woman. The mathematical model would need to consider both the correlated and uncorrelated factors and must be unbiased.