On the relationship between the estimates of level models and difference models

This paper proves that if a linear regression model has a constant term and its disturbances have a positive-definite variance-covariance matrix, its slope coefficients have the same generalized least squares estimates as the slope coefficients of the corresponding difference model. It is also illus...

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Bibliographic Details
Published in:American journal of agricultural economics 1989-05, Vol.71 (2), p.432-434
Main Authors: Maeshiro, A, Wichers, R
Format: Article
Language:English
Subjects:
applied research
Constant coefficients
differencing
econometric models
Economic models
Estimate reliability
Estimators
generalized least squares
Gross national product
Least squares
linear models
Linear regression
ordinary least squares
Regression analysis
Regression coefficients
Statistical variance
variance covariance matrix
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Summary:This paper proves that if a linear regression model has a constant term and its disturbances have a positive-definite variance-covariance matrix, its slope coefficients have the same generalized least squares estimates as the slope coefficients of the corresponding difference model. It is also illustrated that if the original model is homogenous (i.e., with no constant term) and/or a constant term is inadvertently included in the difference model and/or the ordinary least squares estimator is adopted for the difference model, one can incur a great loss in estimation efficiency.
ISSN:0002-9092
1467-8276
DOI:10.2307/1241601