Two-stage least squares (2SLS) is a regression technique
that is used when explanatory variables are believed to be
correlated with the regression model’s error term used to
obtain consistent estimators15. One or more instrumental
variables (IVs) that are correlated with the endogenous
explanatory variable, but uncorrelated with the dependent
variable are used to isolate the effects of the endogenous
explanatory variable. This process increases consistency
(relative to OLS), at the expense of increasing sample
variance.