1. There is not general solution to this one, each answer was graded individually based upon how well you completed the steps in the project outline.
2. The answer to problem 8.3 is in this pdf file.
3. What are the three requirements for a good instrumental variable?
An instrument should be (i) uncorrelated with the error term, (ii) correlated with the variable it is instrumenting for, and (iii) it should not be an explanatory variable itself.
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