two-stage least squares

Definitions

Economics

  • noun a way of using simultaneous equations in econometric procedures by which right-hand variables are replaced by the result of their own equations. This gives a more accurate result than simply running the equations normally. The two stages referred to are firstly, the creation of new dependent variables to replace the originals, and secondly, regression calculated as normal but using the new variables.

Health Economics

  • (written as Two-stage Least Squares)
    A method of statistical regression used as an alternative to ordinary least squares (OLS) when some of its assumptions are violated. The two stages are: (1) the creation of new dependent or endogenous variables to replace original ones, and (2) computing the regression OLS fashion, but using the newly created variables.
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