Question: Consider the following causal equation: Yi Bo + BXi + BW + Ui where U; is the disturbance term, So #0, 8 0 and

Consider the following causal equation: Yi Bo + BXi + BW + Ui where U; is the disturbance term, So #0, 8 0

Consider the following causal equation: Yi Bo + BXi + BW + Ui where U; is the disturbance term, So #0, 8 0 and 32 0. X, is an endogenous regressor and you have access to a single variable, Z, that you may be able to use as an instrument for X. For each of the scenarios detailed below, explain whether a 2SLS strategy using Z; to instrument for X, can be applied to consistently estimate the slope coefficients (31,82) in the causal equation. Note that the regressor W; is not omitted from the population regression function. Unless you are given information to the contrary, you can assume that all of the conditions required for the consistency of 2SLS are met.

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