Investigate analytically the likely direction of the bias


In principle ASVABC might be a positive function of S, in which case the educational attainment model should have two equations:

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Using your EAEF data set, fit the second equation, first using OLS, second using instrumental variables estimation with SM as an instrument. Investigate analytically the likely direction of the bias in the slope coefficient in the OLS regression, and check whether a comparison of the OLS and IV estimates confirms your analysis.

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Econometrics: Investigate analytically the likely direction of the bias
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