Heteroskedastic individual effects.

(a) For the one-way error component model with heteroskedastic \(\mu_{i}\), i.e., \(\mu_{i} \sim\left(0, w_{i}^{2}ight)\), verify that \(\Omega=E\left(u u^{\prime}ight)\) is given by (5.1) and (5.2).

(b) Using the Wansbeek and Kapteyn (1982) trick show that \(\Omega\) can also be written as in (5.3).

= E(uu') = ZZ + 6 INT = (5.1)