Instrumental Variables, Endogeneity, Regression, Linear Regression, Python.
combination of z_3 and an error term as follows: A regression of x_3 on z_3 (Image by Author) However, z_3 could also be correlated with x_2. Such kind of collinearity amongst regression variables is very common in real settings. Due to this collinearity, x_2 may be influencing x_3 via z_3 and in