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On the Relationship between the Estimates of Level Models and Difference Models
Author(s) -
Maeshiro Asatoshi,
Wichers Robert
Publication year - 1989
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241601
Subject(s) - mathematics , constant (computer programming) , term (time) , ordinary least squares , estimator , statistics , covariance , variance (accounting) , least squares function approximation , generalized least squares , covariance matrix , linear model , econometrics , computer science , economics , physics , accounting , quantum mechanics , programming language
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.