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Error Components Regression Models and Their Applications

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  • Swarnjit S. Arora

Abstract

In this paper, we have developed an operational method for estimating error components regression models when the variance- covariance matrix of the disturbance terms is unkown. Monte Carlo Studies were conducted to compare the relative efficiency of the pooled estimator obtained by this procedure to (a) an ordinary least sources estimator based on data aggregated over time, (b) the covariance estimator, and (d) a generalized least squares estimator based on a known variance-covariance matrix. For T small and large p, this estimator definitely performs better than the other estimators which are also based on an estimated value of the variance-covariance matrix of the disturbances. For p small and large T it compares equally well with other estimators.

Suggested Citation

  • Swarnjit S. Arora, 1973. "Error Components Regression Models and Their Applications," NBER Working Papers 0003, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0003
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    References listed on IDEAS

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    1. Swamy, P A V B & Arora, S S, 1972. "The Exact Finite Sample Properties of the Estimators of Coefficients in the Error Components Regression Models," Econometrica, Econometric Society, vol. 40(2), pages 261-275, March.
    2. Henderson, Charles R, Jr, 1971. "Comment on 'The Use of Error Components Models in Combining Cross Section with Time Series Data'," Econometrica, Econometric Society, vol. 39(2), pages 397-401, March.
    3. Nerlove, Marc, 1971. "Further Evidence on the Estimation of Dynamic Economic Relations from a Time Series of Cross Sections," Econometrica, Econometric Society, vol. 39(2), pages 359-382, March.
    4. Maddala, G S, 1971. "The Use of Variance Components Models in Pooling Cross Section and Time Series Data," Econometrica, Econometric Society, vol. 39(2), pages 341-358, March.
    5. 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.
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    1. Jichuan Wang & James H. Fisher, 1994. "Comments on “Estimating Macro-Relationships Using Micro-Data: A One-Stage Approachâ€," Sociological Methods & Research, , vol. 22(4), pages 520-531, May.
    2. 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.

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