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Hey, I'm having trouble with this textbook problem - if someone could provide the steps and solution it would be greatly appreciated. :) 1. Suppose

Hey, I'm having trouble with this textbook problem - if someone could provide the steps and solution it would be greatly appreciated. :)

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1. Suppose that Youngki wishes to estimate the effect of class attendance on student performance. A basic model is studful = Bo + Bratndrte + BypriGPA + u where studful is the standardized outcome on a final exam, atndrte is the percentage of classes attended, and priGPA prior college grade point. a. Let dist be the distance from the students' living quarters to the lecture hall. Do you think dist is uncorrelated with u? b. Assuming that dist and u are uncorrelated, what other assumption must dist satisfy to be a valid IV for atndrte? c. Suppose that we add the interaction term priGPS . atndrte: studful = Bo + Bratndrte + BypriGPA + BapriGPA . atndrte + u. If atndre is correlated with u, then, in general, so is priGPA . atndrte. What might be a good IV for priGPA . atndrte? \\ Hint: If E[ulpriGPA, dist] = 0, as happens when priGPA and dist are all exogenous, then any function of priGPA and dist is uncorrelated with u

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