Consider the following model relating crime in a city i to a number of determinants VIOLCRIME,=...

 

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Consider the following model relating crime in a city i to a number of determinants VIOLCRIME,= Bo+3₁ POLICE+B₂DEATH,+83POPDENS,+BAUNEMP,+U₁. (1) The goal of the analysis is to determine whether higher per capita expenditures on the police force can reduce the crime incidents. The variables are defined as follows: VIOLCRIME = POLICE DEATH THE POPDENS UNEMP Violent Crime, incidents per capita Per capita expenditures on police Dummy variable, equals one if city is in state that allows death penalty = Population density = Unemployment rate You can assume that you have observations for each of these variables for a sample of 100 cities. (f) What conditions must an instrumental variable satisfy? Consider the following model relating crime in a city i to a number of determinants VIOLCRIME,= Bo+3₁ POLICE+B₂DEATH,+83POPDENS,+BAUNEMP,+U₁. (1) The goal of the analysis is to determine whether higher per capita expenditures on the police force can reduce the crime incidents. The variables are defined as follows: VIOLCRIME = POLICE DEATH THE POPDENS UNEMP Violent Crime, incidents per capita Per capita expenditures on police Dummy variable, equals one if city is in state that allows death penalty = Population density = Unemployment rate You can assume that you have observations for each of these variables for a sample of 100 cities. (f) What conditions must an instrumental variable satisfy?

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To serve as a valid instrumental variable it must satisfy the following conditions Relevance The ins... View the full answer