Question: Special cases of the simultaneous equations model with one-way error component disturbances. (a) Consider a system of two structural equations with one-way error component disturbances.

Special cases of the simultaneous equations model with one-way error component disturbances.

(a) Consider a system of two structural equations with one-way error component disturbances. Show that if the disturbances between the two equations are uncorrelated, then EC3SLS is equivalent to EC2SLS (see Baltagi (1981b)).

(b) Show that if this system of two equations with one-way error component disturbances is just-identified, then EC3SLS does not necessarily reduce to EC2SLS (see Baltagi (1981b)).

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