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Homework Instrumental variable
Explain the concept of endogeneity in the context
Homework Instrumental variable
Explain the concept of endogeneity in the context of regression analysis. How can instrumental variables be used to address endogeneity? Provide an example to illustrate your explanation.
Consider a scenario where you are investigating the relationship between government spending and economic growth. Discuss potential sources of endogeneity in this relationship and propose a suitable instrumental variable that could be used to address this issue. Describe how you would verify the validity of your instrumental variable and its relevance to the research question.
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