Economics · Econometrics
Suppose the true model is log-linear, but a researcher estimates a linear model. Which of the following is most likely? 1. Omitted variable bias necessarily occurs. 2. Functional form misspecification may lead to biased and inconsistent estimates. 3. Residuals may exhibit systematic patterns. 4. R2 must decrease. Choose the correct option:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 12, 3 and 4 only
- 21, 2 and 3 only
- 31 and 4 only
- 42 and 3 only✓
Correct answer
2 and 3 only
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