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Imagine you would like to estimate the following model health Bo + B₁cigarettes_day + u where health is self-rated health on a 1 to 5 scale (5 = very healthy) and cigarettes_day is the number of cigarettes the person smokes per day (on average). Imagine you would like to estimate B₁ using an instrumental variable (IV) regression. As instrument, you would use the variable female, which is equal to 1 if the person is female and 0 otherwise. For the situation described above, a) state the IV relevance assumption b) state the IV exogeneity assumption In your answer, use the actual variable names (instead of e.g. x, y and z).

Imagine you would like to estimate the following model health Bo + B₁cigarettes_day + u where health is self-rated health on a 1 to 5 scale (5 = very healthy) and cigarettes_day is the number of cigarettes the person smokes per day (on average). Imagine you would like to estimate B₁ using an instrumental variable (IV) regression. As instrument, you would use the variable female, which is equal to 1 if the person is female and 0 otherwise. For the situation described above, a) state the IV relevance assumption b) state the IV exogeneity assumption In your answer, use the actual variable names (instead of e.g. x, y and z).

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Imagine you would like to estimate the following model Bo B₁cigarettes_day + u health = where health is self-rated health on a 1 to 5 scale (5 = very healthy) and cigarettes_day is the number of cigarettes the person smokes per day (on average). Imagine you would like to estimate B₁ using an instrumental variable (IV) regression. As instrument, you would use the variable female, which is equal to 1 if the person is female and 0 otherwise. For the situation described above, a) state the IV relevance assumption b) state the IV exogeneity assumption In your answer, use the actual variable names (instead of e.g. x, y and z).
Transcribed Image Text:Imagine you would like to estimate the following model Bo B₁cigarettes_day + u health = where health is self-rated health on a 1 to 5 scale (5 = very healthy) and cigarettes_day is the number of cigarettes the person smokes per day (on average). Imagine you would like to estimate B₁ using an instrumental variable (IV) regression. As instrument, you would use the variable female, which is equal to 1 if the person is female and 0 otherwise. For the situation described above, a) state the IV relevance assumption b) state the IV exogeneity assumption In your answer, use the actual variable names (instead of e.g. x, y and z).
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