What are Endogeneity and Exogeneity? | Five Minute Econometrics | Econometric Tutorial | Topic 19

00:00 What are Endogeneity and Exogeneity
01:39 Cause of Endogeneity
04:20 Methods to Alleviate Endogeneity

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【Five Minute Econometrics】(Econometric Tutorial) Topic 19: What are Endogeneity and Exogeneity?

Hi, I am Bob. Welcome to the Five Minute Econometrics, an econometric tutorial on basic econometric concepts and estimation methods. Today, we will have a look at the concepts of ``Endogeneity" and ``Exogeneity". They closely relate to the fourth assumption of the classical linear model, the zero conditional mean assumption. When the assumption fails, or, equivalently, when the explanatory variable x is correlated with the error term epsilon, the explanatory variable is endogenous. The model suffers from an endogeneity problem. If the explanatory variable x is not correlated with the error term epsilon, then x is said to be an exogenous explanatory variable.

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