The Determining Function That Drives Share of Accepted Job Offers

question 14

Multiple Choice

The determining function that drives share of accepted job offers for a company is given by the following equation: AcceptedOffers_t = α₀ + α₁StartingSalary_t + α₂EconomicClimate_t + U_t, where the unit of observation is particular month (t) . Suppose one wanted to use the national unemployment rate (unemployment_t) as a proxy for EconomicClimate (i.e., ran the above regression replacing the UnemploymentRate with EconomicClimate) . How should we interpret the estimated coefficient on the UnemploymentRate (i.e., the proxy variable) ?

• A) A good estimate for α₂ in the above determining function.
• B) A good estimate for α₁ in the above determining function.
• C) A good estimate for α₁ + α₂ in the above determining function.
• D) None of the answers is correct.