Extension of Classical Methods II

Our purpose in this section is to derive the limiting distribution of the 2SLS and 3SLS estimators obtained in Chapter 1. In that chapter we derived several types of estimators, viz., the standard 2SLS and 3SLS, the restricted 2SLS and 3SLS, unrestricted reduced form (OLS) estimators; we have also presented an alternative derivation of 2SLS and 3SLS, obtained by minimizing the objective function(s) when the prior restrictions are imposed by the device of Lagrange multipliers. This is in contrast to the standard derivation where such, restrictions are imposed directly, by substitution.