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Imagine you would like to estimate the following model health = Bo + B1cigarettes_day + u where health is self-rated health on a 1 to
Imagine you would like to estimate the following model health = Bo + B1cigarettes_day + u where health is self-rated health on a 1 to 5 scale (5 = very healthy) and cigarettes_day is the number of cigarettes the person smokes per day (on average). Imagine you would like to estimate By using an instrumental variable (IV) regression. As instrument, you would use the variable female, which is equal to 1 if the person is female and 0 otherwise For the situation described above, a) state the IV relevance assumption b) state the IV exogeneity assumption
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