In the case of errors-in-variables bias,
A)maximum likelihood estimation must be used.
B)the OLS estimator is consistent if the variance in the unobservable variable is relatively large compared to variance in the measurement error.
C)the OLS estimator is consistent, but no longer unbiased in small samples.
D)binary variables should not be used as independent variables.

Question

Quizplus · Accepted Answer

The OLS estimator is consistent if the variance in the unobservable variable is relatively large compared to the variance in the measurement error, as the measurement error becomes negligible in comparison.

In the Case of Errors-In-Variables Bias