ECOS3035: Economics of Political Institutions
Homework III
Question 1 [35 marks in total]: Academic researcher A is interested in identifying the
causal impact of politicians’ reputation on the Republican vote share, at the county-level,
during the 2024 US Presidential Election. She is currently gathering data and brainstorm-
ing on a potential identification strategy. She needs your help with the following questions.
1. What is the simplest form of the Ordinary Least Squares (OLS) equation that she can
use as a starting point of her econometric analysis. Use Y to denote the dependent
variable, X to denote the treatment variable and β to denote the coefficient of interest,
and ε to denote the error term. [3 marks]
2. Within this OLS specification, explain whether politicians’ reputation will assume
the position of X or Y. Why? What is the position of the Republican vote share?
Why? [4 marks]
3. Within this specification, what does the coefficient of interest β represent? [2 marks]
4. List the two major empirical challenges that restrict the researcher from causally
interpreting the coefficient of interest β and explain what they mean. [8 marks]
5. A colleague suggests using “Instrumental Variables (IV)” to address concerns on
causality. Explain to Researcher A what this method is, and the conditions that
should be satisfied for the effective use of this method. [8 marks]
6. Researcher A has access to a dataset on a media campaign which propagated fake
negative news on politicians during the election. This campaign was randomly de-
ployed across counties, i.e. some counties were exposed to this campaign while others
were not. Can she use this dataset to construct a valid IV for this project? Why or
why not? [10 marks]
– END OF HOMEWORK –
1

学霸联盟