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Solving the regression equation with a single regressor.

Comprise the regression model with a single regressor: Y1 = β0 + β1βi + ui,

Assume that the assumption in key concept are satisfied.

a.Show that Xi is a valid instrument. That is, show that key concept 12.3 is satisfied with Zi = Xi.

b.Show that the IV regression assumptions in key concept 12.4 are satisfied with this choice of Zi.

c.Shows that the IV estimator constructed using Zi = Xi is identical to the OLS estimator.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919566

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