EC2SLS and EC3SLS for the two-way error component Model. Consider the two-way error component model given in (6.9) and the covariance matrix \(\Omega_{j l}\) between the \(j\) th and \(l\) th equation disturbances given in (6.11):

(a) Derive the EC2SLS estimator for \(\delta_{1}\) in (7.1).

(b) Derive the EC3SLS estimator for \(\delta\) in (7.20) (Hint: See Baltagi (1981b).

(c) Repeat problem 7.7 parts

(a) and

(b) for the two-way error component EC2SLS and EC3SLS.

uj = Zuflj + Zxj + vj (j= 1, ..., M) (6.9)