Question 1: Suppose there is a strong negative correlation between smoking and wages evident in...

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Question 1: Suppose there is a strong negative correlation between smoking and wages evident in cross sectional analysis. A researcher notes that a new and highly effective smoking cessation product...

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Question 1:
Suppose there is a strong negative correlation between smoking and wages evident in cross sectional analysis. A researcher notes that a new and highly effective smoking cessation product is being distributed through a single retail chain. She considers using the distance of an individual’s house to one of the retailer’s outlets as an instrument for smoking in order to establish causality. Along with distance and whether a person is using the smoking cessation product or not, she has a random sample of data from 20% of the population which contains self-reported smoking status, age, sex, marital status, number of children and employment status.
A. Assess the validity of the proposed instrument. Describe clearly how the researcher can assess the strength of the instrument.
B. Assuming the instrument were valid, carefully describe the population for which it would estimate the average effect of quitting smoking.
C. Write down the first stage, second stage and reduced form equations, which the researcher may want to estimate, as well as an equation which represents the causal relationship of interest.
D. State clearly whether you think that two stage least squares can recover the causal effect of the smoking cessation product using distance as an instrument.
Justify your answer.

005_10u0a5o-rfgoum11.zip

Answered Same Day Dec 26, 2021

David · Accepted Answer

There have been a number of experiments to analyze the scenario of smoking practice. Validity 
requires that an instrument is reliable, but an instrument can be reliable without being valid. For 
example, a scale that is incorrectly calibrated may yield exactly the same, albeit inaccurate, 
weight values. Validity is not a property of the  test  itself.  Instead, validity  is  the  extent  to  
which  the interpretations of the results of a test are  warranted,  which  depend  on  the test’s 
intended use (i.e., measurement of the underlying construct).  Measurement of a construct 
requires that the conceptual definition be translated into an operational definition. 
Comprehensive literature reviews on measurement approaches are therefore critical in guiding 
the selection of measures and measurement instruments. Given the fact that there is a negative 
correlation between smoking and wages, it is clearly evident that the section of society where 
this instrument targets is the one with lower wage rates, this can further be seen from the point of 
education health gradient. This implies that the ones we are concerned with have lower education 
levels, and hence more likely to have unhealthy practices along with many other factors related 
to this. Hence it is required that they develop a theoretically and empirically motivated set of 
components that stand the best chance of accurately capturing perceived argument strength.  This 
panel data should be surveyed over time with individuals being observed more than one time 
period.  However, variations in data may become a problem, since smoking habit is subject to 
change over a period of time for any individual. This transition should be carefully analyzed.  
The vital instrument being considered here is the distance of the retailer from the individual’s 
house.  Since there is a single retail chain involved in the distribution, it is poised to cause some 
difficulties in the process. Finding the correlation between the distance and the individual’s 
pattern of consuming the cessation is an important parameter.

Question 1: Suppose there is a strong negative correlation between smoking and wages evident in cross sectional analysis. A researcher notes that a new and highly effective smoking cessation product...

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