Wooldridge Chapter 2

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When creating an econometric model, we must specify the

1) form of the function, e.g. linear, exponential, log

2) parameters of the model (betas), i.e. the size and direction of the effects of each random variable - the coefficients of the random variables

3) must deal with the unobservable variables appropriately (more on that later).

A sample may be non-random due to a number of biases (and that's bad, hmmmkay?):

1) sample-selection bias