Homework Assignment 2 - Let’s suppose we wanted to investigate

Homework Assignment 2

You may work with others to complete this assignment, and may submit a single hard copy for a group of no more than 4. You are, of course, welcome to compete this individually.

 Let’s suppose we wanted to investigate the relationship between the number of terror attacks in a country and some explanatory variables. Suppose I wanted to run regressions as follows:

Y = Xβ + γZ

Y counts the number of terror attacks occurring in a country in a year. X includes an intercept and fixed effects for region and year. Options for Z are described below. For each of the following:

 i) give me your guess on whether γ is likely to be positive or negative

 ii) Suppose γ > 0 and is statistically significant, explain why X may not be causal.

iii) Suppose γ < 0 and is statistically significant, explain why X may not be causal. iv) Suppose γ is near 0 and is not statistically significant, explain why X may still be causal.

If you have a concern that applies to more than one of the following, you can just note that without repeating yourself.

 1) Median Income

2) Population Density

3) Police officers per capita

4) Percentage of the population which is Muslim

5) Number of national leaders in the last 20 years.