Instrumental Variables Estimation and Two-Stage Least Squares - Motivation: Omitted Variables in a Simple Regression Model
3 important questions on Instrumental Variables Estimation and Two-Stage Least Squares - Motivation: Omitted Variables in a Simple Regression Model
For what can instrumental variables be used and what kind of instrumental variables are there?
We can consistently estimate B0 and B1 if we can find a variable z that satisfies two assumptions,
(1) cov(z,u)=0 (instrument exogeneity) (cannot be tested)
(2) cov(z,x)=/=0 (instrument relevance) (can be tested)
Such a variable z is called an instrumental variable for x.
What can be said about the asymptotic variance of the IV estimator?
What follows for the properties of IV when instrument z is weak?
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
![Trustpilot Logo](/images/design_2020/lp/clp-trustpilot-en.png)