Testing the consistency of IV estimator in the instrumental variable regression model.
Comprise the instrumental variable regression model Yi β0 + β1 X1+ β2 X1+ui, where Zi is an instrument, Assume that data on Wi are not available and the model is estimated omitting Wi. from the regression.
1.Suppose Zi and Wi are uncorrelated. Is the IV estimator consistent?
2.Suppose Zi and Wi are correlated. Is the IV estimator consistent?