OLS is biased and inconsistent whenever a regressor is correlated with the error term — endogeneity. These slides set out where endogeneity comes from (omitted variables, simultaneity, measurement error), define the instrumental-variables estimator, and establish the conditions — instrument validity and relevance — under which IV is consistent when OLS is not.
What these materials cover
- Endogeneity: why E[uᵢ|xᵢ] ≠ 0 destroys OLS unbiasedness and consistency
- Sources of endogeneity: omitted variables, simultaneity, measurement error
- The IV estimator: definition, intuition and derivation
- Instrument validity (exogeneity) and relevance conditions
- Consistency and asymptotic properties of IV
Download
Free to download and use for personal study. Written for my own university teaching; shared here as evidence of teaching style and depth.
Lecture slides: Endogeneity & instrumental variables (17 slides) (PDF)
Who this is for
MSc and advanced undergraduate students meeting IV for the first time, and dissertation students deciding whether their empirical strategy needs an instrument.
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Related free resources
- Cross-Section Econometrics — full study-note hub
- Instrumental variables and weak instruments — study note
- Generalized Method of Moments (GMM) — study note
- All teaching materials — notes, exercises and solutions
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