OLS with First Differences With strict exogeneity of xi, C), ols regression of lyit on Axi is unbiased and consistent but inefficient 8 2 1 00 2 Var 813-62 000 O(Toeplitz forr 8 T-1 2 GLS is unpleasantly complicated. In order to compute a first step estimator of o, 2 we would use fixed effects. We should just stop there. Or, use OLS in first differences and use Newey-West with one lagOLS with First Differences With strict exogeneity of (Xi ,ci ), OLS regression of Δyit on Δxit is unbiased and consistent but inefficient. i i 2 2 i,2 i,1 2 2 2 i,3 i,2 2 2 2 2 i,T i,T 1 2 0 0 2 Var (Toeplitz form) 0 0 2        −      −     −        −  −  −   =     − −        −      −    GLS is unpleasantly complicated. In order to compute a first step estimator of σε 2 we would use fixed effects. We should just stop there. Or, use OLS in first differences and use Newey-West with one lag