187 IV11 2SLS worked example

Dive into a practical numerical example of the Instrumental Variable (IV) estimator in action. This video demonstrates how to estimate the causal effect of education on earnings, using distance to the nearest university as an instrumental variable. We walk you through each step, from the first stage and reduced form estimation to calculating the final IV coefficient. Understand the crucial interpretation of the Local Average Treatment Effect (LATE) and why it matters for your analysis. Specifically, we use annual earnings (Y), years of education (X), and distance to university (Z) to illustrate the process. Visit AxiomTutoring.com for more resources and subscribe to @AxiomTutoringCourses for more econometrics tutorials.