What is the first stage of 2SLS?
A)estimate parameters of reduced form equations and find predicted values
B)find a random sample large enough to divide into 2 separate samples for the two stages
C)estimate parameters of the structural equations using OLS
D)use reduced form parameter estimates as explanatory variables

Question

Quizplus · Accepted Answer

The first stage of Two-Stage Least Squares (2SLS) involves estimating the parameters of the reduced form equations for the endogenous variables and then using these estimates to obtain predicted values of the endogenous variables. These predicted values are used in the second stage as explanatory variables to address endogeneity issues.

What Is the First Stage of 2SLS