Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Systematic
component
Random
component
The coefficient
is expected to have a negative sign, while
is expected to be positive
To complete the specification of the model, the assumptions
about the random variable u is needed
Assumption 1 (randomness of u)
ui is a random real variable : it may bepositif, negative or zero
Assumption 2 (zero mean of u)
The mean value of u in any particular period is zero
Assumption 3 (homoscedasticity)
The variance of ui is constant in each period
Assumption 4
the variable ui has a normal distribution
Assumption 5 (Nonautocorrelation)
The random term of different observation (ui, uj) are
independent: covariance of any ui with any other uj
are equal to zero
for
Assumption 6
u is independent of explanatory variable(s) : their
covariance is zero
Assumption 6A
The Xis are set of fixed value in the hypothetical
process of repeated sampling which underlies the
linear regression model
Assumption 7 (No errors of measurement in
the Xs)
The explanatory variable(s) are measured without
Where,
,
, and
Note:
where
, K being the total number of
parameter which
are estimated.
In the three-variable model K=3
Transformation of Nonlinear
Function Involving Constant
Elasticities
the apropriate transformation for the estimation of
the constant elasticity form is to work with the