Wednesday, October 26, 2005

Bias?

My econometrics textbook (Wooldridge 3rd edition) uses Ray Fair's election prediction model as an example. The quasi-dummy variable for party in the White House is...+1 when a Democrat is in office and -1 when a Republican is in office (not a dummy because constructing it this way saves two degrees of freedom). Bias or alphabetical order? You be the judge!

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