We now want to understand how to measure the impact of the policy. If the policy iseffective in reducing driving, then pollution should go down. In the model, we capturedthe effect of the choice of transportation on pollution with the function C(x₁, x₂). Inpractice, the actual reduction in pollution can only be known after the policy is imple-mented.51. Suppose that you had data on the amount of pollution in London every year. Writedown the regression equation that you would need to estimate to measure the effectof ULEZ on pollution. Describe carefully what the dependent variable, theindependent variable, the unit of observation (time or location), and the maincoefficient of interest are. What control variables do you think should be includedin this regression?

To measure the effect of the Ultra Low Emission Zone (ULEZ) on pollution in London, a regression…

Answered: We now want to understand how to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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We now want to understand how to measure the impact of the policy. If the policy is
effective in reducing driving, then pollution should go down. In the model, we captured
the effect of the choice of transportation on pollution with the function C(x₁, x₂). In
practice, the actual reduction in pollution can only be known after the policy is imple-
mented.
5
1. Suppose that you had data on the amount of pollution in London every year. Write
down the regression equation that you would need to estimate to measure the effect
of ULEZ on pollution. Describe carefully what the dependent variable, the
independent variable, the unit of observation (time or location), and the main
coefficient of interest are. What control variables do you think should be included
in this regression?

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Explain carefully why running the regression above might suffer from endogeneity concerns: are their any unobservable variables that might confound the results? Should we be worried about reverse causality? What empirical methods could we use to address these concerns?

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