Subject: Econometrics – Topic: Endogeneity, economics homework help

To run a study on the effect of a new diet a researcher runs a survey. The three most important questions in this survey are: (1) What was your weight one year ago? (2) What is your current weight? (3) Did you follow this diet in the past year?

We denote the answers of individual i = 1,… , n to the first two questions with y_i0 and y_i1, the answer to the third question is denoted by d_i (where d_i = 1 if the diet was followed). Furthermore, some background characteristics of the respondents are collected. These characteristics are combined in the vector x_i . Assume that all respondents are perfectly able to correctly answer the questions in the survey and do so truthfully.

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