Instrumental Variables, Endogeneity, Regression, Linear Regression, Python.
estimates it produces are unbiased. There is no need for IV based estimation. But now suppose x_3 is endogenous. We’ll conceptually look at the variance of x_3 as being made of two parts: A chunk that is uncorrelated with ϵ. This is the part of x_3 that is, in fact, exogenous. A second chunk that