4. Instrumental Variable and Simultaneous Equation Model Consider the following structural system of equations (in deviations...

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4. Instrumental Variable and Simultaneous Equation Model Consider the following structural system of equations (in deviations form): Yli B 192 i + Ui Y2i 2i + axi + Uzi = i. No restriction on a's. ii. a = 0. = Where Y and Y are endogenous variables, Xis exogenous variable, and u and u are uncorre- lated with each other.3 and 2 are the structural parameters of interest. 1 a. (2 points) State the order condition for an equation to be identified. b. (3 points) Discuss the identifiability of the structural parameters using the condition for identification for each of the following cases: c. (2 points) For case (i), can the reduced form equations be used to identify any of the parameters of the structural equations? Which one(s)? [Hint: Write out the reduced form equation.] d. (3 points) Suppose you run two regressions for case (iii) Y1 = & +8x + 1 Y/2 = % +71x + 2 What does / estimate? What is the name of this estimator? How to carry out this estimation in STATA by one line of command? 4. Instrumental Variable and Simultaneous Equation Model Consider the following structural system of equations (in deviations form): Yli B 192 i + Ui Y2i 2i + axi + Uzi = i. No restriction on a's. ii. a = 0. = Where Y and Y are endogenous variables, Xis exogenous variable, and u and u are uncorre- lated with each other.3 and 2 are the structural parameters of interest. 1 a. (2 points) State the order condition for an equation to be identified. b. (3 points) Discuss the identifiability of the structural parameters using the condition for identification for each of the following cases: c. (2 points) For case (i), can the reduced form equations be used to identify any of the parameters of the structural equations? Which one(s)? [Hint: Write out the reduced form equation.] d. (3 points) Suppose you run two regressions for case (iii) Y1 = & +8x + 1 Y/2 = % +71x + 2 What does / estimate? What is the name of this estimator? How to carry out this estimation in STATA by one line of command?