Lecture 5: Endogeneity and IV Estimation Flashcards
Can we test whether the zero conditional mean assumption holds?
No
What are the 4 main sources of endogeneity?
Write out the algebraic proof of an example of when the zero condition mean error assumption fails
What are the 2 selection effects that might mean the simple mincer OLS is biased?
How might there be OVB in the mincer equation?
What is the best solution for omitted variable bias?
What would happen to the estimate for educ on wage if you capture motivation?
Apart from OMV what are the 3 other main sources of endogeneity?
What is the impact of having a measurement error in the dependent variable?
What is the impact of having a measurement error in the explanatory variable?
What is simultaneity or Reverse Causality?
What is lagged dependent variable with autocorrelation?
Explain IV estimation
What are the two conditions need for an IV regression?
Exclusion restrictions must hold
Rank condition must hold
What is the exclusion restriction?
What is the rank condition?
what are the differences between the exclusion restriction and the rank condition?
Compare the OLS and IV estimators. Write out the formulas and explain the different using intuition
Why is the IV estimator sometimes called the two-Stages Least Squares?
Define the following:
1. Structural equation
2. First stage regression
3. second-stage regression
4. Reduced form regression
How do you do multiple IVs and what is underidentification?
What are the 4 properties of an IV estimator?
Give me an example of a famous IV strategy
Describe the schooling and quarter of birth application
