Can you explain each step how to solve the variables? Xki =Zitktvki What is SLS 1. For any endogenous xk, regress xk on z in the model Xki ZiTk + Vki resulting in TCK = ► Since X = [₁,...kl. = = ? Xk 2. Regress y on xk instead of xk resulting in BIV = (X'X) ¹X'y (Z'Z)-¹ Z'xk -1 z (Z'Z)-¹ Z'xk X = Z (Z'Z)-¹z'x 1

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Can you explain each step how to solve the variables?
Xki =Zitktvki
What is
SLS
1. For any endogenous xk, regress xk on z in the model
Xki =Zitktvki
resulting in
πk
Xk
=
► Since X = [₁,...,xkl.
?
=
(Z'Z)-¹ Z'xk
z (Z'Z)-¹ Z'xk
2. Regress y on xk instead of xk resulting in
BIV = (X'X) ¹X'y
X = Z (Z'Z)-¹z'x
1
Transcribed Image Text:Can you explain each step how to solve the variables? Xki =Zitktvki What is SLS 1. For any endogenous xk, regress xk on z in the model Xki =Zitktvki resulting in πk Xk = ► Since X = [₁,...,xkl. ? = (Z'Z)-¹ Z'xk z (Z'Z)-¹ Z'xk 2. Regress y on xk instead of xk resulting in BIV = (X'X) ¹X'y X = Z (Z'Z)-¹z'x 1
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