Let the following LPM describe the relationship of interest. are the included ex

Question

Let the following LPM describe the relationship of interest. are the included exogenous variables. The authors of this article have data on a standardized test taken when each student was a sophomore. How might they use this data to improve their estimates of the effects of attending a Catholic school? Let CathReli be equal to 1 if the student is Catholic, and 0 otherwise. Discuss the validity of this variable as a possible instrument for attending Catholic school. Being Catholic has a significant effect on the probability of attending a Catholic high school, and the t for the null that the coefficient on being Catholic is 0 against a two

Explanation / Answer

if var( u|Cath HS) is not contant but depends on the change of Cath HS the it might happen that the u and Cath HS are correlatted. But in usual sence variance should be independent to the Cath HS

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