IV Flashcards
1
Q
How do we get unbiased estimate of B1?
A
We isolate variation that captures only the exogenous part
2
Q
What is the two parts of variation in Xi?
A
- One endogenous part that is correlated with ui
- One exogenous part that is uncorrelated with ui
3
Q
What is meant by independence (IV)
A
Zi uncorrelated with other omitted variables and the error term
4
Q
What is meant by exclusion restriction
A
Zi cannot be part of the error term (another omitted variable);
5
Q
The Wald estimator
A
The simplest IV estimator uses a single
binary instrument Z, one endogenous
variable X and no covariates.
6
Q
A
