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On computing generalized least squares and maximum-likelihood estimates of error-components models with incomplete panels and correlated disturbances

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  • Robert F. Phillips

    (George Washington University)

Abstract

Calculation of the inverse of the error variance-covariance matrix is required for both feasible generalized least squares and maximum-likelihood estimation of the regression parameters in the two-way error-components model. Since in many applications this matrix can be quite large, efficient computational methods for inverting the matrix are therefore needed. Incomplete panels complicate calculation of the inverse, and, to date, an efficient method for calculating the inverse has not been provided for the two-way error-components model in which the disturbances are correlated and the panel is incomplete. This note rectifies this shortcoming.

Suggested Citation

  • Robert F. Phillips, 2012. "On computing generalized least squares and maximum-likelihood estimates of error-components models with incomplete panels and correlated disturbances," Economics Bulletin, AccessEcon, vol. 32(4), pages 3017-3024.
    • Handle: RePEc:ebl:ecbull:eb-12-00648
    as

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    References listed on IDEAS

    as
    1. Wansbeek, Tom & Kapteyn, Arie, 1989. "Estimation of the error-components model with incomplete panels," Journal of Econometrics, Elsevier, vol. 41(3), pages 341-361, July.
    2. Davis, Peter, 2002. "Estimating multi-way error components models with unbalanced data structures," Journal of Econometrics, Elsevier, vol. 106(1), pages 67-95, January.
    3. Fuller, Wayne A. & Battese, George E., 1974. "Estimation of linear models with crossed-error structure," Journal of Econometrics, Elsevier, vol. 2(1), pages 67-78, May.
    4. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(6), pages 814-823, December.
    5. Sune Karlsson & Jimmy Skoglund, 2004. "Maximum-likelihood based inference in the two-way random effects model with serially correlated time effects," Empirical Economics, Springer, vol. 29(1), pages 79-88, January.
    6. Wallace, T D & Hussain, Ashiq, 1969. "The Use of Error Components Models in Combining Cross Section with Time Series Data," Econometrica, Econometric Society, vol. 37(1), pages 55-72, January.
    7. Badi H. Baltagi & Seuck H. Song & Byoung C. Jung, 2002. "A comparative study of alternative estimators for the unbalanced two-way error component regression model," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 480-493, June.
    8. Balestra, Pietro, 1980. "A note on the exact transformation associated with the first-order moving average process," Journal of Econometrics, Elsevier, vol. 14(3), pages 381-394, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    autoregressive; unbalanced panel; random effects;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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