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Some Econometric Issues in Convergence Regressions

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  • Adriana Di Liberto

    (Universitý di Cagliari and University College London)

  • James Symons

Abstract

Despite the abundance of different econometric techniques introduced in the empirical literature on convergence, it is usually assumed that shocks are uncorrelated across countries. This is unlikely for most of the data sets considered and we investigate a possibility so far ignored, namely the annual panel estimator where shocks are allowed to be correlated. Our analysis is restricted to the case of T > N which allows us to estimate by maximum likelihood with an unrestricted variance-covariance matrix of cross-country shocks. We examine by Monte Carlo robustness against certain possible misspecifications, namely measurement error and heterogeneity of the convergence coefficients. Copyright 2003 Blackwell Publishing Ltd and The Victoria University of Manchester.

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 71 (2003)
Issue (Month): 3 (06)
Pages: 293-307

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Handle: RePEc:bla:manchs:v:71:y:2003:i:3:p:293-307

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  1. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  2. Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997. "Growth and Convergence in Multi-country Empirical Stochastic Solow Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug..
  3. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  4. Robertson, D & Symons, J, 1992. "Some Strange Properties of Panel Data Estimators," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 175-89, April-Jun.
  5. Grubb, David & Symons, James, 1987. "Bias in Regressions With a Lagged Dependent Variable," Econometric Theory, Cambridge University Press, vol. 3(03), pages 371-386, June.
  6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  7. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
  8. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  9. Malcolm D. Knight & Delano Villanueva & Norman Loayza, 1992. "Testing the Neoclassical Theory of Economic Growth," IMF Working Papers 92/106, International Monetary Fund.
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Cited by:
  1. A. Di Liberto, 2004. "Convergence clubs and the role of human capital in Spanish Regional Growth," Working Paper CRENoS 200418, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Adriana Di Liberto & Roberto Mura & Francesco Pigliaru, 2003. "A panel technique for the analysis of technology convergence: The case of the Italian regions," ERSA conference papers ersa03p293, European Regional Science Association.
  3. Donald Robertson & James Symons, 2000. "Factor residuals in SUR regressions: estimating panels allowing for cross sectional correlation," LSE Research Online Documents on Economics 20163, London School of Economics and Political Science, LSE Library.
  4. Di Liberto, Adriana, 2008. "Education and Italian regional development," Economics of Education Review, Elsevier, vol. 27(1), pages 94-107, February.
  5. R. Naylor, 2001. "Firm profits and the number of firms under unionised oligopoly," Working Paper CRENoS 200109, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  6. Artelaris, Panagiotis & Arvanitidis, Paschalis & Petrakos, George, 2008. "Convergence Patterns in the World Economy: Exploring the Non-Linearity Hypothesis," Papers DYNREG32, Economic and Social Research Institute (ESRI).
  7. R. Naylor, 2001. "Industry profits and market size under bilateral oligopoly," Working Paper CRENoS 200108, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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