Panel Data - Memorial University of Newfoundland
Panel Data - Memorial University of Newfoundland
Panel Data - Memorial University of Newfoundland
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( ) = ( + ) = ( ) + ( ) = 0+ 0=<br />
0<br />
E v E u e E u E e<br />
it i it i it<br />
( v ) var ( u e )<br />
σ = var = +<br />
2<br />
v it i it<br />
v has zero mean<br />
( u ) ( e ) ( u e )<br />
= var + var + 2cov ,<br />
=σ +σ<br />
2 2<br />
u e<br />
i it i it<br />
v has constant variance<br />
If there is no correlation between<br />
the individual effects and the<br />
error term<br />
(15.25)<br />
Principles <strong>of</strong> Econometrics, 3rd Edition<br />
Slide 15-40