An alternative heteroskedastic error component model.

(a) For the one-way error component model with heteroskedastic remainder disturbances, i.e., \(u_{i t} \sim\) (0, \(w_{i}^{2}\) ), verify that \(\Omega=E\left(u u^{\prime}ight)\) is given by (5.5).

(b) Using the Wansbeek and Kapteyn (1982) trick show that \(\Omega\) can also be written as in (5.6).

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= E(uu') = diag[6] & Jr + diag[w] & Ir - = (5.5)