ECON 710 Final: ECON 710 UW Madison Final Exam 2006
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E (ei j xi) = 0 i j xi(cid:1) = (cid:27)2. E (cid:0)e2 where xi = (x1i; x2i); and y2i is binary (either 0 or 1) with. P (y2i j xi) = p(xi) where p(x) is a known function. What are the optimal instrumental variables to estimate (cid:12) 1 and (cid:12) 2: consider the model yi = z 0. E (xiei) = 0 i(cid:12) + ei zi = (cid:0)xi + ui: = 0. Demonstrate your claim: take the model y1i = x1i(cid:12) 1 + x2i(cid:12) 2 + x3i(cid:12) 3 + x4i(cid:12) 4 + ei. H1 (cid:12) 1 (cid:12) 2 (cid:12) 1 (cid:12) 2. 6= (cid:12) 3 (cid:12) 4 (cid:12) 3 (cid:12) 4: the model is y1i = x0. 1i(cid:12) 1 + x2i(cid:12) 2 + ei where x2i 2 r: you want to test. Describe how to test h0 using the nonparametric bootstrap: take the model yi = zi(cid:12) + ei where zi 2 r is considered endogenous.
