New method solves bias in economic models, improving accuracy of predictions.
The article explores different methods for estimating parameters in simultaneous equations models, which are used to understand complex socio-economic phenomena. These models often face the issue of endogeneity, leading to biased estimates. The study shows the relationships between methods like instrumental variables, indirect least squares, and two-stage least squares. By comparing these methods, the researchers demonstrate how they can be used to address the problem of endogeneity and improve the accuracy of parameter estimates.