Two-way random effects model, we modify the random effects model by the addition of a time specific disturbance. Thus, yit = + 'xit +

Two-way random effects model, we modify the random effects model by the addition of a time specific disturbance. Thus, yit = α + β'xit + εit + ui + vt, where

Write out the full covariance matrix for a data set with n = 2 and T = 2.

E[it] E [] = E[v] = 0, E[enuj] = E[Vs] = E[v] =0 Var[s] = 0 Cov[, js] =0 Var[u]=o, Cov[u,, uj] = 0 Var[v] , Cov[v, us] =0 for all i, j, t, s for all i, j, t.s for all i, j for all t, s.