Instrumental Variables. General Use. For getting a consistent estimate of β in Y=X β + ε when X is correlated with ε Will see it working with omitted variable bias, endogeneity, measurement error Intuition: variation in X can be divided into two bits:
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when X is correlated with ε
. reg y x1 x2 (x2 z)
. ivreg y x2 (x1=z)