Suppose that annual earnings and alcohol consumption are determined by the SEM log(earnings) = 0 + 1
Question:
log(earnings) = β0 + β1 alcohol + β2 educ + ux
alcohol - y0 + y1 log(earnings) + y2educ + y3 log(price) + u2,
where price is a local price index for alcohol, which includes state and local taxes. Assume that educ and price are exogenous. If β1, β2, y1, y2, and y3 are all different from zero, which equation is identified? How would you estimate that equation?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
Question Posted: