An Illustration of the Bias of OLS for Yt = λY t-1 + U t

Using longitudinal data on undergraduates from 463 American colleges and universities from 1994–99, the authors examine how majoring in economics affects student opinions on 13 social, political, and economic issues. Economics majors were found to begin and end their college tenure with differing opinions on several issues when compared to other majors, and studying economics was found to be related to changes in several opinions. On the whole, studying economics appeared to increase beliefs in favor of personal freedom and decrease support for government intervention in markets. However, the authors find little evidence that economics majors leave college more united on their opinions when compared to the general student population.     

Teaching Regressions with a Lagged Dependent Variable and Autocorrelated Disturbances

The author attempts to rectify the unsatisfactory textbook treatment of the finite-sample properties of estimators of regression models with a lagged dependent variable and autocorrelated disturbances. He contends that the bias of the OLS estimator of a regression model with a lagged dependent variable and autocorrelated disturbances is determined by two effects, the dynamic effect and the correlation effect, which may be reinforcing or offsetting. The implications of these two effects are explored within a theoretical and a Monte Carlo framework.