Review #1 …

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Is there a systematic way to assess regression studies? (SW Chapter 9)

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A Framework for Assessing Statistical Studies: Internal and External Validity

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Threats to External Validity

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Threats to Internal Validity

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1. Wrong functional form

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2. Omitted variable bias

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3. Errors-in-variables bias

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Errors-in-variables bias

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Errors-in-variables bias

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Potential solutions to errors-in-variables bias

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4. Sample selection bias

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Example #1: Mutual funds

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Example #2: Returns to education

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Potential solutions to sample selection bias

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5. Simultaneous causality bias

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Simultaneous causality bias

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Potential solutions to simultaneous causality bias

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Internal and External Validity When the Regression is Used for Forecasting

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Applying External and Internal Validity: Test Scores and Class Size

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The Massachusetts data: summary statistics

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Predicted effects for a class size reduction of 2

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Summary of Findings for Massachusetts

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Comparison of estimated class size effects: CA vs. MA

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Summary: Comparison of California and Massachusetts Regression Analyses

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Remaining threats to internal validity in the test score/class size example?

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Spot the Endogeneity?

• Effect of police on crime …

• Estimating the effect of police on crime …

• Source: Levitt (American Economic Review, 1997)

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Spot the Endogeneity?• Estimating the effect of police on crime …

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Spot the Endogeneity?• Estimating the effect of guns on crime …

• Source: Ayres and Donohue (Stanford Law Review, 2003)

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Spot the Endogeneity?• Estimating the effect of studying on GPA …

• Source: Stinebricker and Stinebricker (BE Journal of Analysis & Policy, 2008)

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Spot the Endogeneity?• Estimating the effect of school start time on academic

performance …

• Source: Carrell, Maghakian, and West (American Economic Journal: Economic Policy, 2011)

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Spot the Endogeneity?• Estimating the effect of national income on democracy

…

• Source: Acemoglu, Johnson, Robinson, and Yared (American Economic Review, 2008)

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Spot the Endogeneity?• Estimating the effect of competition on student

achievement …

• Source: Hoxby (American Economic Review, 2000)

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Spot the Endogeneity?• Estimating the effect of teen drinking on HS

completion/attending college …

• Source: Dee & Evans (Journal of Labor Economics, 2003)