Consider the following formulations of the two variable PRF Model I Y i 1 2 X i u i Model II Y i 1 2 (X i X ) u i a Find the estimators of 1 and 1 Are they identical Are their variances identical b Find the estimators of 2 and 2 Are they identical Are their variances identical c What is the advanta...

a 1 Y 2 X i and 1 Y 2 x Note x i X i X Y since x i 0 var 1 x i 2 n ...

Consider the following formulations of the two-variable PRF: Model I: Y i = 1 +

Question:

Consider the following formulations of the two-variable PRF:

Model I: Y_i = β₁ + β₂X_i + u_i

Model II: Y_i = α₁ + α₂(X_i – X̅ ) + u_i

a. Find the estimators of β₁ and α₁. Are they identical? Are their variances identical?

b. Find the estimators of β₂ and α₂. Are they identical? Are their variances identical?

c. What is the advantage, if any, of model II over model I?

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Basic Econometrics

ISBN: 978-0073375779

5th edition

Authors: Damodar N. Gujrati, Dawn C. Porter

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Question Posted: Apr 30, 2018 03:10 AM

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Consider the following formulations of the two-variable PRF: Model I: Y i = 1 +

Question:

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a 1 Y 2 X i and 1 Y 2 x Note x i X i X Y since x i 0 var 1 x i 2 n ...View the full answer

Basic Econometrics

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