QUESTION 6 Consider the following regression model: y = Bo + B1x1 + B2x2 + u (1), where the explanatory variable x, is suspected of being endogenous (correlated with u) and the explanatory variable x2 is exogenous (uncorrelated with u). Further consider the following regression model: X, = no + miz + 12x2 + v (2), where my # 0 and Cov(z,u) = 0. Which of the following statements is correct? To test for the endogeneity of x1, estimate the reduced form equation (2), using OLS, Oa. and obtain the residuals, V . Add $ to the structural equation (1) to get regression model (3): y = Bo + B1x1 + Ob. B2x2 + 617 + e. Estimate (3) using OLS. Test the statistical significance of > in (3), using a t test. If is statistically different Oc. from zero, conclude that x, is endogenous. Od. All of the above