Instrumental Variables, Endogeneity, Regression, Linear Regression, Python.
following two properties: z_3 is correlated with x_3. Notation-wise: Cov(z_3, x_3) != 0. This is known as the relevance condition for including z_3. Simply put, z_3 should be relevant to x_3. z_3 is uncorrelated with the error term, i.e. E(ϵ|x_3)= 0 or constant, and E(ϵ*x_3)=0. This is known as the