Special cases of the SUR model with error component disturbances. Consider a set of two equations with one-way error components disturbances.

(a) Show that if the variance-covariance matrix between the equations is blockdiagonal, then GLS on the system is equivalent to GLS on each equation separately (see Avery 1977; Baltagi 1980).

(b) Show that if the explanatory variables are the same across the two equations, GLS on the system does not necessarily revert to GLS on each equation separately (seeAvery 1977; Baltagi 1980).

(c) Does your answer to parts (a) and (b) change if the disturbances followed a two-way error component model?