Suppose we want to estimate the parameters of the model
$$y_i = β_1 + \frac{1}{β_2}x_i + ɛ_i$$
under the standard assumptions for OLS. We assume $β_2 > 0$. We run OLS on the regression
$$y_i = δ_1 + δ_2x_i + ɛ_i$$
to obtain $\hat\delta_2$ and then use the estimator $\hat\beta_2 = \frac{1}{\hat\delta_2}$
- Is $\hat\beta_2$ unbiased? If not, what is the sign of the bias?
- Is $\hat\beta_2$ consistent?
My Approach
First, to show that $\hat\beta_2$ is unbiased, i derived
$$\hat\delta_2 = \frac{cov(y_i,x_i)}{var(x_i)}$$ $$=\frac{cov(β_1 + \frac{1}{β_2}x_i + ɛ_i,x_i)}{var(x_i)}$$ $$=\frac{cov(β_1,x_i) + cov(\frac{1}{β_2}x_i,x_i) + cov(ɛ_i,x_i)}{var(x_i)}$$ $$=\frac{cov(β_1,x_i) +\frac{1}{β_2}var(x_i) + cov(ɛ_i,x_i)}{var(x_i)}$$
Under standard OLS assumptions we have $cov(β_1,x_i)=0$ and $cov(ɛ_i,x_i)=0$. We then get
$$\hat\delta_2 = \frac{1}{β_2} => \hat\beta_2 = \frac{1}{\hat\delta_2} = \beta_2$$
$=> \hat\beta_2$ is unbiased as $E[\hat\beta_2]-\beta_2 = 0$
Second, as unbiasedness does not imply consistency, i am not sure how to proceed whether $\beta_2$ is consistent. I know that consistency further need LLN and CLT, but i am not sure how wo apply these two theorems.