1972 Klevmarken - Statistical methods for the analysis of earnings data

Page 144

To simplify the notation all zero elements have been omitted from the matrix. By assumption (5 :28) has pq rows and 1+p+q+pq columns and thus rank (5:28) ~ pq. As the last pq columns form an identity matrix there is equality and rank (5 :28) = pq. There are thus p+q + 1 independent linear relations among the columns. The same two relations from the additive model still hold, namely that the sum of the a-regressors and the sum of the ~-re­ gressors each equal the Jl-regressor. Furthermore, for each i the sum of the ( a~) .. columns over j equals the a· column and for each j the sum of the (a~) .. lJ 1 lJ columns over all i equals the ~. colun1n. However, this does not give p+q inJ dependent relations, but p+q-l; because one can be obtained froln the others. This is seen from the following vector relations. p

(5:29)

p. = L a· ; i= 1

1

q-l ~

q

= Jl -

q-l

p

L ~.

j=l

L a· - L

J

i=l

~.

j=l J

1

;

(5:30)

q

a· = L (a~) .. ; 1 j=l lJ

i=l, ... ,p

(5:31)

j=l, ... ,(q-l)

(5 :32)

p ~.

J

=L

i=l

«(X~) .. ;

lJ

After substitution of (5 :29) and (5 :32) into (5 :30) and a change of the summation order we obtain q ~

q

= L

p

q

p

L (0:(3) .. - L L lJ

j=l i=l

j=l i=l

p

(a~) ..

lJ

=L

i=l

(0:(3).

lq

;

(5:33)

p+q+ 1 independent linear relations have now been demonstrated. The vector {ln</>..} 1 of a two·factor model with interactions as (5 :13) lj pqx thus belongs to a pq-<limensional space, while a model without interactions is restricted to a p+q-l dimensional space. The restrictions imposed on the additive model are of the following kind. For instance for p=q=2, (5 :13) gives lnep .. = Il lJ

+

(x.

1

+ ~J..'

i=1,2.

j=1,2

(5:34)

which yields the restriction (5 :35)

145


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