In this paper we show that the 3SLS estimator of a system of equations is asymptotically equivalent to an iterative 2SLS estimator applied to each equation, augmented with the residuals from the other equations. This result is a natural extension of Telser (1964).

Fixed effects vector decomposition (FEVD) is simply an instrumental variables (IV) estimator with a particular choice of instruments and a special case of the well-known Hausman-Taylor IV procedure. Plümper and Troeger (PT) now acknowledge this point and disown the three-stage procedure that...