Abstract
Abstract This paper makes two contributions: (a) it provides a new derivation of 2SLS and 3SLS estimators in which they are represented as restricted least squares and restricted generalized least squares, respectively; (b) in the convext thus created it provides a perfectly routine and flexible vehicle for carrying out ‘identifiability’ and specification tests utilizing 2SLS or 3SLS estimators. The tests in question are simple Lagrange multiplier tests (LMT) carried out directly on the prior restrictions, in contrast to the current literature which approaches the problem indirectly through tests on the implications of such prior restrictions on the reduced form. In addition, it provides a limited Monte Carlo study comparing the performance of the newly created tests to that of the Hausman test (HT).
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
