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3 Consider the following simple regression model y = o + ,lel + u and z is an instrument for x. Suppose x and z
3 Consider the following simple regression model y = o + ,lel + u and z is an instrument for x. Suppose x and z are both positively correlated with u and Corr(z,x) > 0. Then, the asymptotic bias in the IV 7 estimator is less than that for OLS only if: D I) O a. Corr(z,u)/ Corr(z,x) = Corr(x,u). O b. Corr(z,u)/ Corr(z,x) Corr(x,u)
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