Instrumental Variables, Endogeneity, Regression, Linear Regression, Python.
by Author) The green bit can be absorbed into a new intercept β*_1. Similarly, we’ll substitute (β_2+β_3* γ_2) with a new coefficient β*_2, and (β_3* γ_3) with β*_3, and the composite error term (β_3*ν)+ϵ can be substituted by ϵ*. With these substitutions, the regression model in Eq (1) is