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A Full Heteroscedastic One-Way Error Components Model for Incomplete Panel : Maximum Likelihood Estimation and Lagrange Multiplier Testing

Author

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  • LEJEUNE, Bernard

    (ERUDITE, University of Liège and CORE, Université catholique de Louvain, Belgium)

Abstract

In this paper, we study maximum likelihood estimation and Lagrange multiplier testing of a one-way error components regression model suitable for incomplete panel and including parametrically specified variance functions for both individual-specific and general error disturbances. All the required ingredients for obtaining the ML estimates are provided. We also derive two Lagrange multiplier test statistics (based on OLS residuals) for jointly testing the null of no individual effects and homoscedasticity. Further, we discuss a Bonferroni multiple comparison procedure intended for identifying the source(s) of departure from the joint null when it is rejected. The practical usefulness of the model and the testing procedures are illustrated by an empirical example in the production analysis field.

Suggested Citation

  • LEJEUNE, Bernard, 1996. "A Full Heteroscedastic One-Way Error Components Model for Incomplete Panel : Maximum Likelihood Estimation and Lagrange Multiplier Testing," LIDAM Discussion Papers CORE 1996006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1996006
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1996.html
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    Cited by:

    1. Baltagi, Badi H. & Jung, Byoung Cheol & Song, Seuck Heun, 2010. "Testing for heteroskedasticity and serial correlation in a random effects panel data model," Journal of Econometrics, Elsevier, vol. 154(2), pages 122-124, February.
    2. Baltagi, Badi H. & Bresson, Georges & Pirotte, Alain, 2006. "Joint LM test for homoskedasticity in a one-way error component model," Journal of Econometrics, Elsevier, vol. 134(2), pages 401-417, October.
    3. Platoni, Silvia & Barbieri, Laura & Moro, Daniele & Sckokai, Paolo, 2020. "Heteroscedastic stratified two-way EC models of single equations and SUR systems," Econometrics and Statistics, Elsevier, vol. 15(C), pages 46-66.
    4. Baltagi, Badi H. & Song, Seuck Heun & Kwon, Jae Hyeok, 2009. "Testing for heteroskedasticity and spatial correlation in a random effects panel data model," Computational Statistics & Data Analysis, Elsevier, vol. 53(8), pages 2897-2922, June.

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