Imposing Observation-Varying Equality Constraints Using Generalised Restricted Least Squares

Doran, Howard E., O'Donnell, Christopher J. and Rambaldi, Alicia N. (2003) Imposing Observation-Varying Equality Constraints Using Generalised Restricted Least Squares. Discussion Paper No 323, School of Economics, University of Queensland.

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Author Doran, Howard E.
O'Donnell, Christopher J.
Rambaldi, Alicia N.
Title Imposing Observation-Varying Equality Constraints Using Generalised Restricted Least Squares
School, Department or Centre School of Economics
Institution University of Queensland
Report Number Discussion Paper No 323
Publication date 2003-04-01
Language eng
Subject 340402 Econometric and Statistical Methods
K
Abstract/Summary Linear equality restrictions derived from economic theory are frequently observation-varying. Except in special cases, Restricted Least Squares (RLS) cannot be used to impose such restrictions without either underconstraining or overconstraining the parameter space. We solve the problem by developing a new estimator that collapses to RLS in cases where the restrictions are observation-invariant. We derive some theoretical properties of our so-called Generalised Restricted Least Squares (GRLS) estimator, and conduct a simulation experiment involving the estimation of a constant returns to scale production function. We find that GRLS significantly outperforms RLS in both small and large samples.
Keyword Econometrics
econometric models
Additional Notes ISBN: 14465523

 
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Created: Thu, 19 Feb 2004, 10:00:00 EST by Belinda Weaver (EA) on behalf of School of Economics