The variance of coefficient estimates in 2SLS is generally smaller than the variance of coefficient estimates in OLS.

Question

Quizplus · Accepted Answer

The variance of coefficient estimates in 2SLS (Two-Stage Least Squares) is generally larger than the variance of coefficient estimates in OLS (Ordinary Least Squares) because 2SLS uses instrumental variables to deal with endogeneity, which introduces an additional source of variability.

The Variance of Coefficient Estimates in 2SLS Is Generally Smaller