Summary And Conclusions

114 PART ONE: SINGLE-EQUATION REGRESSION MODELS

10. In this text, we will largely rely on the OLS method for practical reasons: (a) Compared to ML, the OLS is easy to apply; (b) the ML and OLS estimators of fai and fa are identical (which is true of multiple regressions too); and (c) even in moderately large samples the OLS and ML estimators of a2 do not differ vastly.

However, for the benefit of the mathematically inclined reader, a brief introduction to ML is given in the appendix to this chapter and also in Appendix A.

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