Question: 12.10 Consider the instrumental variable regression model Yi = b0 + b1Xi + b2Wi + ui, where Zi is an instrument. Suppose that data on

12.10 Consider the instrumental variable regression model Yi = b0 + b1Xi +

b2Wi + ui, where Zi is an instrument. Suppose that data on Wi are not available and the model is estimated omitting Wi from the regression.

a. Suppose that Zi and Wi are uncorrelated. Is the IV estimator consistent?

b. Suppose that Zi and Wi are correlated. Is the IV estimator consistent?

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