英语翻译To address this problem,we substitute (3) into (1) to ob

英语翻译
To address this problem,we substitute (3) into (1) to obtain .
Our identifying assumption implies that Pi and Si are uncorrelated with the composite residual,yVi + Ei.Thus (4) can be estimated by instrumental variables,with Pi and Si (and the constant) as the instruments.
Note that estimation of (4) yields an estimate not only of B,international trade's impact of income,but also of yL,country size's impact on income.Since the two components of this coefficient are not identified separately ,one cannot obtain an estimate of Y,the effect of within-country trade on income.But as long as L is positive that is,as long as larger countries have more within-country trade the sign of Y is the same as the sign of yL.Thus,although we cannot estimate the magnitude of the impact of within-country trade on income,we can obtain evidence about its sign.