All else equal, the theoretical justifications for a particular function form should be stronger in the cases in which you are:
A) attempting to identify correlations only.
B) running fixed effects regressions.
C) using an instrumental variable.
D) extrapolating further off the support of the data.

Question

Quizplus · Accepted Answer

Theoretical justifications for a particular function form should be stronger when extrapolating further off the support of the data because you are making assumptions about the relationship between variables beyond the range of observed data. This requires a strong theoretical basis to ensure that the extrapolations are plausible and grounded in established understanding of the phenomena being studied.

All Else Equal, the Theoretical Justifications for a Particular Function