S4E03 Two-Stage Least Squares Strikes Back
Quantitude
Two Stage Less Squares Can Quarantine Miss Specification
The biggest advantage of maximum likelihood is it's a full information estimator. It minimizes the propagation of miss specification to other parts of the model. But because it does it equation by equation, it drags barbed wire around that misspecification. The term that I love that Ken uses is two stage least squares can serve to quarantine miss specification error.
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